KEY FUNDAMENTAL FACTORS AND THE LONG RUN STOCK PRICE CHANGES
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This paper reports new findings on the joint effect six theory-suggested fundamental variables have on share price changes o f industrial firms . The novelty in this paper is identifying the joint effect multiple factors exert in the long run on share prices. The highly sign[ficant joint factors are dividend yield!i, earnings, leverage and.firm size. which are var.iables widely acknowledged in.finance theories and in practice as price relevant factors. These four factors explain three-fzfth ofthe variation in the US share prices. However, two theory-suggestedfac:Lors namely asset growth and payout ratio appears to be insignificant in our tests. This is a preliminary ~·tudy employing a limited sample ofhomogeneous firms to establish reliable findings using a newjoint-effect model.
Abstract
This paper reports new findings on the joint effect six theory-suggested fundamental variables have on share price changes o f industrial firms . The novelty in this paper is identifying the joint effect multiple factors exert in the long run on share prices. The highly sign[ficant joint factors are dividend yield!i, earnings, leverage and.firm size. which are var.iables widely acknowledged in.finance theories and in practice as price relevant factors. These four factors explain three-fzfth ofthe variation in the US share prices. However, two theory-suggestedfac:Lors namely asset growth and payout ratio appears to be insignificant in our tests. This is a preliminary ~·tudy employing a limited sample ofhomogeneous firms to establish reliable findings using a newjoint-effect model.