The Relationship between Financial Ratios and Stock Prices: A Panel VAR Approach
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Published:
Oct 26, 2020
Keywords:
Financial Ratios, Stock Prices, Panel VAR
Main Article Content
Abstract
This article aims to study the relationship between financial ratios and stock prices of the companies listed on the Stock Exchange of Thailand (SET). By using 14 financial ratios published by the SET, the results of 344 samples show that the changes in stock price depends mainly on the changes of stock prices in the past. The average result of the impacts from the past returns is up to 96% and only 4 percent from other financial ratios. The results of the analysis do not support the efficient market theory at both weak and semi-strong form. The results of the study indicate that the use of technical analysis may be superior in predicting stock prices, comparing to the use of fundamental analysis.
Article Details
How to Cite
Sahananporn, J., & Sukcharoensin, S. (2020). The Relationship between Financial Ratios and Stock Prices: A Panel VAR Approach. WMS Journal of Management, 9(4), 15–28. Retrieved from https://so06.tci-thaijo.org/index.php/wms/article/view/245356
Section
Research Articles-Academic Articles
References
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Promin, D. (2018). The Relationship among the Personal Income Tax, Corporate Income Tax, Value Added Tax and Gross Domestic Product. Economics and Public Policy Journal, 8(16), 1-17.
SangSoi, C. (2014). The Relationship between Financial Ratios and Stock Price of Companies Listed in the Stock Market of Thailand: A Case Study of Service Sector. (Master Degree’s Thesis, Bangkok University, Thailand).
Seakrisi, K., Boonmunewai, S., & Wimmoonard, T. (2018). The Influence of Financial Ratio to Market Price of Listed Companies in The Securities Exchange of Thailand: A Case Study of The Service Industry. NRRU Community Research Journal, 12(2), 71-84.
Sims, C. (1980). Macroeconomics and Reality. Econometrica, 48(1),1-48.
Sirijinda, T. (2010). Financial Ratios Affect Stock Return: Evidence in Thailand. (Master Degree’s Thesis, Thammasat University, Thailand).
Songphatanayothin, N. (2016). How the Financial Ratio Affect Return at The Stock Exchange of Thailand (SET). (Master Degree’s Thesis, Thammasat University, Thailand).
Surasmo, A. (2011). Relationship Between Financial Ratio and Market Value of Company Listed in The Stock Exchange of Thailand: A Case Study of Energy and Utilities Group. Master Degree’s Thesis, Ratchamongkol University, Thailand).
Tayanasanti, S. (2012). The Relation Between Financial Ratios and Stock Price: Evidence in MAI Stock Market. (Master Degree’s Thesis, Thammasat University, Thailand).
Uthiram, K. (2013). The Relationship Between Financial Ratios and Expected Return of the Listed Company in Stock Exchange of Thailand: A Case Study of Technology Industries. (Master Degree’s Thesis, Sripatum University, Thailand).
Elhem, J., & Zadollah, F. (2014). Prediction of Stock Returns Using Financial Ratios Based on Historical Cost, Compared with Adjusted Prices (Accounting for Inflation with Neural Network Approach). Indian Journal of Fundamental and Applied Life Sciences ISSN, 4(S4), 1064-1078.
Fama, E. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. Journal of Finance, 25(2), 383-417.
Gujarati, D.N. (2003), Basic Econometrics. New York: McGraw Hill.
Kohansal, M. R. (2013). A Study of Stock Price and Profitability Ratios In Tehran Stock Exchange (TSE). (Master Degree’s Thesis, Isalamic AZAD University, Iran).
Kohansal, M. R. (2013). Relationship between Financial Ratios and Stock Prices for the Food Industry Firms in Stock Exchange of Iran. World Applied Programming, 3(10), 512-521.
Luangrungreng, S. (2008). kānsưksā khwāmsamphan rawāng khwāmsāmāt nai kāntham kamrai kap ʻattrā phontō̜pthǣn čhāk sūan tāng khō̜ng rākhā hun thabīan nai mūat phatthanā ʻasanghārimmasap. [The Study of the Relationship between Profitability and Return from Stock Price Differences in the Property Development Sector]. (Master Degree’s Thesis, University of the Thai Chamber of Commerce, Thailand).
Nudam, P., & Bunworachote, T. (2010). The Dynamic Relationship of Volume and Price of Palm Oil Futures Contracts. (Master Degree’s Thesis, Kasetsart University, Thailand).
Panchatheokhup, P. (2009). Response of Code Inflation to Economics Variables: After Adopting Inflation Target. Thammasat Economic Journal, 27(4), 87-103.
Phakural, S. (2015). The Relationships Between Financial Ratios and The Largest Market Capitalized Companies’ Stock Prices: Evidence from Stock Exchange of Thailand’s All Sector Indices. (Master Degree’s Thesis, Bangkok University, Thailand).
Phothiprasat, S. (2007). khwāmsamphan rawāng ʻattrāsūan thāng kānngœ̄n kap kānplīanplǣng rākhā laksap kō̜ranī sưksā : bō̜risat čhotthabīan nai klum thurakit phatthanā ʻasanghārimmasap. [The Relationship between Financial Ratios and Stock Price: A Case Study on Listed Companies in the Property Development Sector]. (Master Degree’s Thesis, Thammasat University, Thailand).
Promin, D. (2018). The Relationship among the Personal Income Tax, Corporate Income Tax, Value Added Tax and Gross Domestic Product. Economics and Public Policy Journal, 8(16), 1-17.
SangSoi, C. (2014). The Relationship between Financial Ratios and Stock Price of Companies Listed in the Stock Market of Thailand: A Case Study of Service Sector. (Master Degree’s Thesis, Bangkok University, Thailand).
Seakrisi, K., Boonmunewai, S., & Wimmoonard, T. (2018). The Influence of Financial Ratio to Market Price of Listed Companies in The Securities Exchange of Thailand: A Case Study of The Service Industry. NRRU Community Research Journal, 12(2), 71-84.
Sims, C. (1980). Macroeconomics and Reality. Econometrica, 48(1),1-48.
Sirijinda, T. (2010). Financial Ratios Affect Stock Return: Evidence in Thailand. (Master Degree’s Thesis, Thammasat University, Thailand).
Songphatanayothin, N. (2016). How the Financial Ratio Affect Return at The Stock Exchange of Thailand (SET). (Master Degree’s Thesis, Thammasat University, Thailand).
Surasmo, A. (2011). Relationship Between Financial Ratio and Market Value of Company Listed in The Stock Exchange of Thailand: A Case Study of Energy and Utilities Group. Master Degree’s Thesis, Ratchamongkol University, Thailand).
Tayanasanti, S. (2012). The Relation Between Financial Ratios and Stock Price: Evidence in MAI Stock Market. (Master Degree’s Thesis, Thammasat University, Thailand).
Uthiram, K. (2013). The Relationship Between Financial Ratios and Expected Return of the Listed Company in Stock Exchange of Thailand: A Case Study of Technology Industries. (Master Degree’s Thesis, Sripatum University, Thailand).