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Balance-sheet ratios and stock returns: An analysis for Italian banks

Author

Listed:
  • Angela Romagnoli

    (Bank of Italy)

Abstract

The paper assesses whether the monthly returns of the listed shares of Italian banks are predicted by changes in balance-sheet indicators. The sample covers the period from January 1997 to June 2003. Estimates use both unadjusted and risk-adjusted returns. Results show that the stock returns of Italian banks are positively related to past profitability, liquidity, and asset quality, while they are not significantly affected by banks� capital ratios. Furthermore, in the sample period an increase in traditional lending activity leads to higher stock returns.

Suggested Citation

  • Angela Romagnoli, 2007. "Balance-sheet ratios and stock returns: An analysis for Italian banks," Temi di discussione (Economic working papers) 648, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_648_07
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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2007/2007-0648/tema_648.pdf
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    More about this item

    Keywords

    bank stock returns; bank-specific accounting ratios;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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