Abstract
Purpose- This paper investigates whether financial ratios can predict stock returns for the period between from 2004: II and 2014: IV in the Borsa Istanbul (BIST). For this purpose, four financial raitos have been used that include price to book ratio (P/B), price to earning ratio (P/E), dividend per share (DPS) and firm sizes are selected. Methodology- This study applies panel data analysis which is an important predictive regression tools for predicting stock returns. Findings- The results disclose that the financial ratios can predict stock return. Conclusion- From financial ratios, firm size has a higher predictive power than dividend per share and price to book ratio respectively. However, there is no significant relationship between price to earning ratio and for stock returns.
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