Prediction model for stock price performance of manufacturing companies : Application on Ho Chi Minh city stock exchange
Abstract
Financial ratios and its predictability have always been a research topic that attracts a good
many scholars and economists from the past to now. A lot of researches have figured out
the relationship between several financial ratios and stock return as well as stock price.
This research attempts to test whether or not there is a relationship between stock price
performance and financial ratios, especially in Vietnam stock market. Besides, logistic
regression is also applied in order to combine ratios together and develop a model which
helps classify stocks into two categories: GOOD or POOR.
Eight financial ratios are taken into consideration and three of them seem to have
relationship to stock price performance which are Return on equity, Cash earnings per
share and Price/Cash earnings per share. The final logistic regression model which consists
of these three ratios gives an accuracy level up to more than 60 percent. Therefore, the
financial ratios as empirical predictors seem to play unique and complementary roles on
stock price performance predictability.