STUDY INFLUENCE BETWEEN THE FINANCIAL RATIOS AND RETURN ON VALUE INVESTING STOCKS

Abstract

This research aims to study influence between the financial ratios and return on value investing stocks. The sample used the return and financial ratios of companies listed on the SET from January 2013 to December 2017. The statistical instruments used in the study are ordinary least square regression (OLS) with 5 portfolio models and hypothesis test at 95% confidence level.

The study concluded that Price to Book Value Ratio (PBV) and Price to Earnings Ratio (PE) are the criteria for selecting good value investing stocks. The PE is below the market average that indicates the profitability of the stock. Choosing a low value of PBV means a high margin for MOS (Margin of Safety) which results in the highest return.

The ratio of earnings per share per closed price (EPS/P) and price to earnings ratio (PE) according to portfolio model 5, It can explain the relationship in return of portfolio model but the financial ratios of portfolio models 1-4 cannot explain the relationship in return.