Key Features:
Chapters: 5
No of Pages: 90
Methodology: Descriptive and Inferential Statistics
Table of Content:
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study
1.2 Statement of Research Problems
1.3 Research Questions
1.4 Objectives of The Study
1.5 Research Hypotheses
1.6 The Scope of The Study
1.7 Significance of The Study
1.8 Limitations of The Study
1.9 Definition of Terms
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
2.2 Theoretical Review
2.2.1 The Efficient Market Hypothesis
2.2.2 Variants of the Efficient Market Hypothesis
2.2.3 Implications of the Efficient Market Hypothesis
2.2.4 Market-based Financial Ratios
2.3 Empirical Review
2.3.1 EPS and Stock Returns
2.3.2 Price Earnings Ratio P/E and Stock Returns
CHAPTER THREE: METHODOLOGY AND MATERIALS
3.1 Introduction
3.2 Research Design
3.3 Population and Sample Size
3.4 Model Specification
3.4.1 Stock Return Model
3.4.2 Operational Measurement of Variables
3.4.3 Test for Time Series Properties
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1 Introduction
4.2 Descriptive Statistics
4.3 Regression Results for the Selected Companies
4.4 Test of Research Hypotheses
4.5 Policy Implications
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
5.2 Summary of Findings
5.3 Contribution to Knowledge
5.4 Conclusions
5.5 Recommendations
Bibliography
Introduction:
1.1 BACKGROUND TO THE STUDY
The conviction to investigate the impact of market-based ratios on stock returns of petroleum companies listed on the Nigerian Stock Exchange is premised on the fact that for every organized capital market, information (of a financial nature) is among the most crucial factors that determine financial market efficiency (Zeytinoglu, Aquarium & Celik, 2012). According to Emamgholipour, Pouraghajan, Tabari, Haghparast & Shirsavar, (2013), the main purpose of investing in the stock of companies is to buy into the future of a company and increase wealth. This, they assert, is achieved through consistent increases in the selected stock returns. It is therefore not an unusual occurrence that investors in financial markets do increase or decrease their stock holdings and profit level according to the impact of information on stock prices (Zeytinoglu, Aquarium & Celik, 2012). Perhaps, this may be the reason why Emamgholipour et al (2013) opine that in order to be able to achieve stock returns more efficiently and with less risk, an investor needs information about that stock. Stock return, according to them is one of the most important factors in choosing a best investment option from amongst competing alternatives.
To Zeytinoglu et al (2012), stocks are the most preferred investment instruments since they provide higher returns than numerous other possible investment outlets.
As noted by Zeytinoglu, Aquarium & Celik (2012), in an efficient market one cannot use the existing information in the market to make profit, information gathering from financial statements becomes the basic information which investors use in making stock investment decisions.
Emamgholipour et al, (2013) pointed out that the information that exists about a company’s stock captures both internal and external circumstances of that company. The Internal circumstances of a company are reflected by the information in its financial statements. External information of a company also exists in the stock market. According to Moridi Pour and Mousavi (2009), the external and internal information have effect on invests’ stock decisions.
According to Emamgholipour et al (2013), investors have to consider various factors during investments in stocks, because they intend to convert their liquid (cash) assets to stocks. Therefore, in any investment, with relevant financial ratios especially investment ratios, computed from the financial tables, rational investors seek the possible ways by which they can get abnormal returns. They also seek to get information from the future amount of stock returns of companies (Emamgholipour et al, 2013; Zeytinoglu et al, 2012).As pointed out earlier, one of the most common methods of analyzing financial information to facilitate stock investment decisions (among others) is to prepare financial ratios. Namazi and Roostami (2006) assert that financial ratios are a summary of financial reports of companies, which provide much information content from the internal situation of companies. This assertion seems to imply that investors can make and even reverse or adjust their investment decisions following the information portrayed by the financial ratios from a company’s financial statements.
Irrespective of Namazi and Rostami’s assertion, and since Efficient Market Hypothesis holds that investors cannot obtain returns in excess of the normal returns, it is convincing to find out whether market-based ratio have any impact on the stock returns of investors in the food and beverages sub-sector of the Nigerian stock market. Thus, the question “are market-based ratios important predictors of stock returns?” remains unanswered. Whether they are or not, is an expected output of this study.
1.2 STATEMENT OF RESEARCH PROBLEMS
Numerous empirical studies have appeared in recent years concerning the behaviour of stock market returns and its determinants. While a few writers believe that certain price trends and patterns exists to enable the investor to make better predictions of the expected values of future stock market price changes, the majority of these studies conclude that past price data alone cannot form the basis for predicting the expected values of price movements in the stock market (Erika & Idolor, 2009).
Indeed the prediction of stock returns due to changes in some other extraneous variables still continue to pose a major challenge in the literature to date. This has been as a result of a lack of appropriate data for statistical analysis, lack of technical skills to effectively utilize available statistical tools and a lack of in-depth research into that aspect of the capital market. Many futile attempts have been made to predict stock returns in the past. Analysts have used fundamental and technical approaches and more tools are being evolved in the literature to deal with this aspect of the stock market. All the attempts are to see if an investor can beat the market and reap a windfall. The success of such analytical tool would lead to an upward trend in the stock market and further lead to market vibrancy and economic growth and development.
Furthermore, a great majority of such research studies have been conducted using aggregate data of the entire stock market, without any specific consideration of the impact on specific sub-sectors of the stock market. Moreover a great majority of previous research studies have been focused more on the developed capital markets leaving those centered on an emerging/frontier capital market like Nigeria, few and far in between. In this light the background to the study brings into lime light the curiosity of the researcher to examine the impact of a set of market-based financial ratios (or information) on the stock returns of companies listed the oil and gas sector of the Nigerian market.
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