Stock Price Predictability of Financial Ratios and Macroeconomic Variables: A Regulatory Perspective
- Authors
- 곽승욱; 김용석
- Issue Date
- Dec-2013
- Publisher
- 대한산업공학회
- Keywords
- Financial Ratios; Macroeconomic Variables; Sarbanes-Oxley Act; Proxy Beta; Logistic Regression
- Citation
- Industrial Engineering & Management Systems, v.12, no.4, pp 406 - 415
- Pages
- 10
- Journal Title
- Industrial Engineering & Management Systems
- Volume
- 12
- Number
- 4
- Start Page
- 406
- End Page
- 415
- URI
- https://scholarworks.sookmyung.ac.kr/handle/2020.sw.sookmyung/11450
- DOI
- 10.7232/iems.2013.12.4.406
- ISSN
- 1598-7248
2234-6473
- Abstract
- The present study examines a set of financial ratios in predicting the up or down movements of stock prices in the context of a securities law, the Sarbanes-Oxley Act of 2002 (SOA), controlling for macroeconomic variables. Using the logistic regression with proxy betas to alleviate the incompatibility problem between the firm-specific financial ratios and macroeconomic indicators, we report evidence that financial ratios are meaningful predictors of stock price changes, which subdue the influence of croeconomic indicators on stock returns, and more importantly that the SOA truly improves the stock price predictability of financial ratios for the markup sample. The empirical results further suggest that industry and time effects exist and that for the markdown sample the SOA actually deteriorates the predictive power of financial ratios.
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