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Financial ratios used by equity analysts in Mexico and stock returns

Author

Listed:
  • Carlos Omar Trejo Pech

    (Universidad Panamericana)

  • Magdy Noguera

    (University of Idaho)

  • Susan White

    (University of Maryland)

Abstract

A sample of recommendation reports by equity analysts covering Mexican publicly traded firms in Mexico is studied. We propose a set of “most preferred” financial ratios from this sample. It is found that the most preferred ratios by equity analysts, a group of sophisticated users, are not those ratios typically covered in financial textbooks. Moreover, by using panel regression analysis, we test the relationship between financial ratios and leading stock returns during the 1995–2011 period. Overall, consistent with the efficient market hypothesis, the results show that estimates of financial ratios most preferred by equity analysts have predictive power on 1-year future stock returns. We find no evidence of predictive power on 2-year stock returns.

Suggested Citation

  • Carlos Omar Trejo Pech & Magdy Noguera & Susan White, 2015. "Financial ratios used by equity analysts in Mexico and stock returns," Contaduría y Administración, Accounting and Management, vol. 60(3), pages 578-592, julio-sep.
    • Handle: RePEc:nax:conyad:v:60:y:2015:i:3:p:578-592
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    Citations

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    Cited by:

    1. Carlos Omar Trejo-Pech & NyoNyo A. Kyaw & Wei He, 2021. "Capital structure adjustment behavior of listed firms on the Mexican stock exchange," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(4), pages 573-595, October.
    2. Bunea, Ovidiu-Iulian & Corbos, Razvan-Andrei & Popescu, Ruxandra-Irina, 2019. "Influence of some financial indicators on return on equity ratio in the Romanian energy sector - A competitive approach using a DuPont-based analysis," Energy, Elsevier, vol. 189(C).
    3. repec:ags:aaea22:336048 is not listed on IDEAS
    4. Khaira Amalia Fachrudin & M. Fikri Ihsan, 2021. "The Effect of Financial Distress Probability, Firm Size and Liquidity on Stock Return of Energy Users Companies in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 296-300.
    5. Khaled Aljifri & Hafiz Imtiaz Ahmad, 2019. "Preferred Valuation Techniques in the UAE: A Comparative Study of Financial and Nonfinancial Sectors," International Journal of Economics and Financial Issues, Econjournals, vol. 9(1), pages 51-59.
    6. Lijuan Ma & Marcel Ausloos & Christophe Schinckus & H. L. Felicia Chong, 2019. "Fundamental Analysis in China: An Empirical Study of the Relationship between Financial Ratios and Stock Prices," Papers 1910.06746, arXiv.org.
    7. Trejo-Pecha, Carlos J.O. & White, Susan, 2024. "Financial Ratios of the U.S. Grocery Sector in a Changing Industry Landscape," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 6(2), July.

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