The Role of Financial Ratios in Predicting Stock Returns: An Application of Generalized Method of Moments in Borsa Istanbul

Authors : Gökhan Berk Özbek, Ümit Hasan Gözkonan

Pages : 338-347

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Publication Date : 2024-12-30

Article Type : Research Paper

Abstract :One of the main factors shaping the investment decisions of savers is the financial ratios of companies. Indeed, the efficiency of financial markets and the effect of financial data related to companies on their stock performance have always been subjects of interest in the financial literature. This study investigates the effects of the financial ratios of the top ten companies listed on Borsa Istanbul that operate in the industrial sector on their stock performance. The recent ten quarters of data from the companies were included in the research, and the Generalized Method of Moments (GMM)-based Dynamic Panel Approach was applied as the research method. In the research model, Return on Assets (ROA), Return on Equity (ROE), Return on Invested Capital (ROIC), Debt/Equity Ratio (D/E), and Quick Ratio (QR) were defined as independent variables, while stock return was defined as the dependent variable. As a result of the study, it was determined that the ROA and D/E ratios have a negative effect on stock returns, while the ROE ratio has a positive effect.
Keywords : Finansal Oranlar, Pay Getirileri, Genelleştirilmiş Momentler Yöntemi, Borsa İstanbul