Firm Characteristics and Stock Returns: Evidence From an Emerging Market

Authors

  • Abuzar M. A. Eljelly King Saud University
  • Radi S. Al-Haddad The Saudi Investment Bank

DOI:

https://doi.org/10.34120/ajas.v12i2.591

Keywords:

Firm Characteristics, Stock returns, ROE/PB, Emerging Market, Portfolio Performance, Market Efficiency

Abstract

Many studies have documented a significant relationship between various firm characteristics and stock returns. This study, however, documents a relationship between ROE/PB ratio and stock returns in the Saudi banking sector, the one most active and dominating sector in the Saudi stock market. The banking sector is chosen in order to neutralize the problems of illiquidity, fragmentation, and thin trading that are observed in the overall Saudi market. The study formed portfolios based on ROE/PB ratio and examined their performance over an 11 year-period. The results show that high ROE/PB portfolios significantly outperform the low ROE/PB portfolios in terms of risk and return in most periods.

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Author Biographies

Abuzar M. A. Eljelly, King Saud University

Doctor of Business Administration, Finance, Southern Illinois University at Carbondale, 199). Assistant Professor of Finance, Department of Business Administration, King Saud University, Saudi Arabia. Areas of interest: Investments, Financial Markets and Institutions, Corporate Finance.

Radi S. Al-Haddad, The Saudi Investment Bank

Master of Business Administration, King AbdulAziz University, Kingdom of Saudi Arabia, 1990. Certified Financial Analyst (CFA), Deputy Group General Manager, Investment Services and Financial Planning at The Saudi Investment Bank. Areas of interest: Asset Management, Investment Services and Financial Sector Performance, and Market Efficiency.

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Published

2005

How to Cite

Eljelly, A. M. A., & Al-Haddad, R. S. (2005). Firm Characteristics and Stock Returns: Evidence From an Emerging Market. Arab Journal of Administrative Sciences, 12(2), 293–312. https://doi.org/10.34120/ajas.v12i2.591

Issue

Vol. 12 No. 2 (2005)

Section

Finance