This study aimed to predict stock prices in Palestine Stock Exchange (PEX) by testing group of financial ratios and find a quantitative model, in which can be relied upon to predict the stock price for each sector. This model will help investors make rational decisions when they make investment decision in the financial market. To achieve this purpose, (17) financial ratios from (35) listed companies were tested using the available data for period 2009-2013.
These ratios were analyzed using multiple regression to find the best model for each sector of (PEX). Several financial ratios can be used to predict the stock price in the industry sector, which are (earning per stock, market price on book value, days sales outstanding, fixed assets turnover, return on equity and profit margin). In the investment sector, the following ratios (market price on book value, assets turnover, market price on cash flow and fixed assets turnover) can be used to predict the stock price. Adding to that, the ratios of (earning per stock, market price on book value and return on equity) can predict the stock price of service sector. In the insurance sector, the ratios of (earning per stock, return on assets, debt ratio and assets turnover) can be used in predicting stock price. Finally, the ratios of (market price on book value, earning per stock, return on equity, basic earning power and fixed assets turnover) predicting the banking sector stock price.
The study recommended the need to increase attention and caring when preparing the financial statements and must be prepared according to the Palestinian Stock Exchange standards, and the investors can rely on financial analysis of the financial statements when making financial investment decisions.
Table of Contents
1. The Study Background
1.1 Introduction
1.2 The study Problem
1.3 The study Importance
1.4 The study Objectives
1.5 The study hypothesis
1.6 The study Variables
1.6.1 Dependent Variable
1.6.2 Independent Variables
1.7 The literature Reviews
2. Financial Analysis & Stock Valuations
2.1 Introduction
2.2 Financial Analysis
2.3 The important of financial analysis:
2.4 Financial Ratio Analysis:
2.5 The types of financial ratio:
2.5.1 Liquidity Ratios:
2.5.2 Activity ratios:
2.5.3 Debt Ratios:
2.5.4 Profitability Ratios:
2.5.5 Market ratios:
2.6 Potential problems and limitations of financial ratio analysis:
2.7 Stock valuation:
2.7.1 Dividend Yield:
2.7.2 Capital Gains Yield:
2.7.3 Total Return:
2.9 Computing Stock Value:
2.9.1 Constant Growth dividends:
2.9.2 Non-constant Growth Stock dividends:
2.9.3 Zero growth dividends:
3. The Study Methodology & Data analysis
3.1 The Study Methodology
3.1.1 Introduction
3.1.2 The study Design
3.1.3 The Study Population
3.1.4 The Study Sample
3.1.5 The Data Collection
3.1.5.1 The Secondary Data
3.1.6 Data Analysis
3.1.6.1 Collection steps for analysis
3.2 Data analysis & Test the hypothesis
3.2.1 Introduction
3.2.2 Statistical analysis & Test hypothesis
3.2.2.1 Industry sector
3.2.2.2 Investment sector
3.2.2.3 Service sector
3.2.2.4 Insurance sector
3.2.2.5 Banking sector
4. The Results & Recommendations
4.1 The results
4.2 The recommendations
4.3 Future study
Research Objectives & Themes
This study aims to predict stock prices on the Palestine Stock Exchange (PEX) by evaluating a comprehensive set of financial ratios and developing a reliable quantitative model for each market sector to assist investors in making rational, data-driven investment decisions.
- Analysis of the relationship between financial ratios and stock price movements.
- Development of quantitative predictive models for banking, insurance, investment, industry, and service sectors.
- Evaluation of 17 distinct financial ratios across 35 listed companies.
- Identification of critical financial performance indicators for rational decision-making.
Excerpt from the Book
2.4 Financial Ratio Analysis:
Financial ratio analysis is a useful measure to provide a snapshot of a firm’s financial position (Muresan and Wolitzer 2004) at any particular moment of time or to provide a comprehensive idea about the financial performance of the company over a particular period of time. Use of financial ratios in finance is multi-dimensional. It is not only useful for judging the financial health or performance of a particular firm over time, it is also a useful tool for comparing a firm’s financial position and performance with respect to others in the same or different industry to pinpoint problem areas or to identify areas of further improvements (De, Bandyopadhyay and Chakraborty 2010).
Ratio analysis is a mathematical relationship between one numbers to another number. Ratio is used as an index for evaluating the financial performance of the business concern. An accounting ratio shows the mathematical relationship between two figures, which have meaningful relation with each other. Ratio can be classified into various types. Classification from the point of view of financial management is as follows, (Paramasivan and Subramanian, 2009):
Summary of Chapters
The Study Background: Defines the research problem regarding investor reliance on rumors and establishes the importance of financial ratio analysis in the Palestinian market context.
Financial Analysis & Stock Valuations: Provides a theoretical framework for financial statement analysis, ratio classification (liquidity, activity, debt, profitability, market), and stock valuation models.
The Study Methodology & Data analysis: Details the descriptive analytical method, data collection from 35 companies (2009-2013), and the use of multiple regression to test hypotheses across sectors.
The Results & Recommendations: Presents the final predictive models and formulas for each sector, emphasizing the necessity for standardized financial reporting and the efficacy of using quantitative ratios for investment decisions.
Keywords
Palestine Stock Exchange, Financial Ratios, Stock Price Prediction, Multiple Regression, Liquidity Ratios, Activity Ratios, Debt Ratios, Profitability Ratios, Market Ratios, Quantitative Model, Financial Analysis, Investment Decisions, PEX, Earnings Per Stock, Market Value.
Frequently Asked Questions
What is the primary focus of this research?
This research focuses on investigating the role of financial ratio information in predicting stock price changes on the Palestine Stock Exchange (PEX).
Which sectors are covered in the analysis?
The study covers five major sectors: Industry, Investment, Service, Insurance, and Banking.
What is the central research question?
The central question is: What is the role of information resulting from the analysis of financial ratios on the change in stock prices?
What scientific methodology does the author use?
The author employs a descriptive analytical method combined with multiple regression analysis using SPSS to establish predictive quantitative models.
What does the main body of the work address?
The main body addresses the theoretical aspects of financial analysis and stock valuation, followed by a detailed empirical analysis of how specific financial ratios affect stock prices in different sectors.
What are the primary characteristics of the work?
The work is characterized by its empirical focus on the Palestine Stock Exchange, the use of 17 financial ratios, and the construction of sector-specific mathematical models.
How were the companies for the study selected?
Companies were selected based on being registered in the PEX since 2009 or earlier and having sufficient available financial data from 2009 to 2013.
Why are standard financial statements important according to the author?
The author argues that standardized financial statements are crucial for transparency and allow investors to make reliable comparisons between firms within the same sector.
- Arbeit zitieren
- Shakir Al-ghalayini (Autor:in), 2015, The Change in the Stock Price Based on the Information Resulting from the Financial Ratios, München, GRIN Verlag, https://www.grin.com/document/287344
