 Can financial ratios predict the Malaysian stock return?Chin Lee () and Weng Hong Lee MPRA Paper from University Library of Munich, Germany Abstract: The purpose of this paper is to use the dividend yield (DY), earning to price ratio (EP), and capital gain (CG) to predict the Malaysia stock market return from 1995 to 2005 by using the time series regression. We utilize both the univariate and multivariate Ordinary Least Square (OLS) regression analysis to test the future monthly and quarterly stock return. We apply the unit root test to test the stationary of the time series, and various diagnostic tests to check for the robustness of model. We find that the financial ratios and the capital gain have a positive relationship with expected monthly and quarterly stock return. Although not all the model show significant relationship between the financial ratios and stock return, it is proven that the financial ratios and capital gain have some predictive power to predict the Malaysia future stock return. From the overall findings, we can suggest that both the univariatre DY with dummy variable and multivariate DY model with dummy variable are the good models to predict the Malaysia monthly and quarterly future nominal stock return. Keywords: dividend yield (DY); earning to price ratio (EP); and capital gain (CG); stock market return; Malaysia; Ordinary Least Square (OLS) (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:59170 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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