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Do Financial Ratios Affect Stock Returns in the Athens Stock Exchange?

Author

Listed:
  • Katerina Lyroudi

    (Hellenic Open University, Patra, Greece)

  • Pantelis Valkanas

    (Hellenic Open University, Patra, Greece)

Abstract

This study examines whether selected financial ratios can be used to explain stock price movement in the Athens stock exchange (ASE) for the period between 2005 and 2014. Information about potential driving factors of stock returns can be useful to capital market analysts and investors when trying to predict stock price movements and also to the managers of the underlying companies when they are planning their strategies. The financial ratios selected are the return on equity, the net profit margin, the assets turnover ratio, the assets to equity ratio, the current ratio and the dividend payout ratio. The empirical results of our study showed that during the examined period a statistically significant relation was not in generally observed between stock returns and the examined ratios. This was also the case when the periods from 2005 to 2009 and from 2010 to 2014 were examined separately. Only the return on equity was found to be significant for the overall period, as well as for the period from 2010 to 2014. Opposite to what we expected, the ROE coefficient was found to be negatively related to stock returns.

Suggested Citation

  • Katerina Lyroudi & Pantelis Valkanas, 2018. "Do Financial Ratios Affect Stock Returns in the Athens Stock Exchange?," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 497-516, December.
    • Handle: RePEc:nwe:eajour:y:2018:i:4:p:497-516
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    Cited by:

    1. Yllka Ahmeti & Albina Kalimashi & Ardi Ahmeti & Skender Ahmeti, 2024. "Factors Affecting Sustainable Growth Rate and its Impact on Financial Performance of Kosovo Manufacturing Companies," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 61-74.

    More about this item

    Keywords

    financial ratios; stock prices;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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