Review of Quantitative Finance and Accounting

, Volume 41, Issue 3, pp 463–487

Firm fundamentals and stock prices in emerging Asian stock markets: some panel data evidence

Authors

    • Faculty of Business, Economics and Policy StudiesUniversiti Brunei Darussalam
  • M. Kabir Hassan
    • Department of Economics and FinanceUniversity of New Orleans
Original Research

DOI: 10.1007/s11156-012-0316-x

Cite this article as:
Rahman, M.A. & Hassan, M.K. Rev Quant Finan Acc (2013) 41: 463. doi:10.1007/s11156-012-0316-x

Abstract

The purpose of this paper is to investigate the direct link between firm fundamentals and stock prices in a set of emerging Asian stock markets using firm-level panel data. In doing so, we explore the relationship between firm-specific variations in stock returns and firm fundamentals in the context of a simple present value framework. We find that alternative proxies of variation in firm fundamentals—albeit at differing degrees—explain a significant part of firm-specific return variation in a majority of emerging markets in Asia. Findings are robust to the influence of other factors known to affect stock return volatility (e.g. firm size, stock turnover, and leverage). Overall results suggest that stock prices in a majority of the Asian emerging markets contain a significant amount of firm-specific fundamental information and are, therefore, not as murky as commonly thought.

Keywords

Emerging stock markets Firm-specific variation in returns Firm-specific variation in fundamentals Panel data

JEL Classification

G14 G18 G30 C33

Copyright information

© Springer Science+Business Media, LLC 2012