Financial ratios used by equity analysts in Mexico and stock returns

Carlos Trejo-Pech, Magdy Noguera and Susan White
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Magdy Noguera: University of Idaho
Susan White: University of Maryland

Contaduría y Administración, 2015, vol. 60, issue 3, 578-592

Abstract: A sample of recommendation reports by equity analysts covering Mexican publicly traded firms in Mexico is studied. We propose a set of “most preferred” financial ratios from this sample. It is found that the most preferred ratios by equity analysts, a group of sophisticated users, are not those ratios typically covered in financial textbooks. Moreover, by using panel regression analysis, we test the relationship between financial ratios and leading stock returns during the 1995–2011 period. Overall, consistent with the efficient market hypothesis, the results show that estimates of financial ratios most preferred by equity analysts have predictive power on 1-year future stock returns. We find no evidence of predictive power on 2-year stock returns.

Keywords: Financial ratios; Equity analysts; Mexican firms; Panel regression (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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