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Analysis of Factors Impacting Stock Price Change of

Companies Listed on Casablancas Stock Market

Ayoub Fikri
Al Akhawayn University
Charaf El Gharbi
Al Akhawayn University
Fatima Zahra Chakir
Al Akhawayn University
Dr. Khondker Aktaruzzaman
Assistant Professor, Al Akhawayn University

Fall 2014

Abstract

Making profit is the common goal for the most of investors. In order to make a decision
concerning investing in stock exchange, investors should deeply understand the factors that
determine the stock price. According to scholars, the stock price of a company tend to be
unstable, which lead investors to look for the elements that are influencing it in order to predict
its movement, consequently make a profitable investment decision. The factors that influence the
stock price can be either internal or external, and direct or indirect. The internal factors include
dividend, which is the cash payment that the stockholders receive, the market capital that is the
companys value, the net income that is the total earning of the company, the earning per share,
the liquidity of the firm, the book value and the return on equity. The external factors could be
any change in the government policies, political issues, rules and regulations, the international
situation, the exchange rate and the media. In this study, we selected three internal factors that
could affect the stock price, which are the earning per share, the book value, and the return on
equity. After running different tests using the multiple regression analysis including T-test, F-test,
and Durbin Watson test, we found significant results as P-value < , which would be interpreted
by the existence of a linear relationship between the independent variables (earning per share,
book value, and return on equity), and the dependent variable (stock price).

Table of Contents
Introduction ..................................................................................................................................................3
Data & Descriptive statistics .......................................................................................................................4
Data ............................................................................................................................................................4
Descriptive statistics ...................................................................................................................................4
Assumptions ...............................................................................................................................................6
Methodology & Findings .............................................................................................................................7
Methodology ..............................................................................................................................................7
Findings ......................................................................................................................................................7
R and R adjusted .................................................................................................................................8
F-Test .....................................................................................................................................................9
T-Test .....................................................................................................................................................9
Confidence Interval Estimation ............................................................................................................10
Durbin Watson Analysis ......................................................................................................................11
Conclusion ...................................................................................................................................................12
Literature Cited ..........................................................................................................................................13
Appendix A: Data Set ...............................................................................................................................14
Appendix B: Excel Data Output ...............................................................................................................15
Appendix C: SPSS Data Output ...............................................................................................................19

1. Introduction:

Many factors can cause the price of a stock to rise or fall; it could be from specific news
about a companys earnings or a change in how investors feel about the stock market in general.
In our research, using the statistical tools learned in class we decided to demonstrate how the
stock price is influenced by other factors, particularly in Moroccans companies. In order to
choose our independent variables and before collecting data, our team has done some extensive
research to find out what are the appropriate factors that we can use for the research. We based
the search on other countries in order to see afterwards if the same factors could be applied to the
Moroccan context.
According to a study that was conducted in Malaysia, earning per share significantly affects
stock prices. The aim of the study was to determine the impact of the earning per share (EPS) on
stock prices of Public Banks located in Malaysia, and to measure the degree of stock prices
response to changes in earning per share. The study indicated that EPS has a significant impact
on the movement of stock prices of the bank, and contributes significantly to the explanation of
long-term stock price variation. Hence, it is considered as one of the strongest factors to evaluate
the actual performance and the progress of a company since it reflects its financial situation.
In 1984, a researcher called Balakrishnan studied the impact of dividend per share, earning
per share, and book value and yield on share price of firms in India and his studies showed up
that the book value and dividend per share turned out to be the most valuable determinants of
market price in all firms studied. However, in our project dividend per share was not found in
many Moroccan companies while collecting data so we could not consider it as one of the
independent variables and only chose the book value. Moreover, in another study that AL
Khalaileh conducted in 2001; 40 Jordanian public firms were chosen as a sample for his study. Al
Khalaileh examined the link between accounting performance indicators and market ones. The
outcome showed an important optimistic relationship between the market price per share and the
ratios of return on assets and return on equity.

2. Data and Descriptive statistics:


Data:
To collect data in order to conduct our project, we have been searching in the Casablanca
Stock Exchange website, and we have retrieved a sample of 35 companies for the year 2014 after
erasing those with insufficient data. After a deep research in what are the factors that could
influence the stock price, we have found ourselves with only three main factors applicable in the
Moroccan context that are earning per share, book value, and return on equity. The sample size
is equal to 35, so the central limit theorem is applicable for this study and the population is
normally distributed.
Descriptive statistics:
First, we will analyze the data using descriptive analysis techniques.

12

Book Value

10
8
6
4
2
0
0

500

1000

1500

2000

2500

Stock Price

Figure 1: Scatter plot of the Stock Price versus the Book Value.

3000

3500

4000

40

Return on Equity (%)

35
30
25
20
15
10
5
0
0

500

1000

1500

2000

2500

3000

3500

4000

Stock Price

Figure 2: Scatter plot of the Stock Price versus the Return on Equity (%).
250

Earnings per Share

200

150

100

50

0
0

500

1000

1500

2000

2500

3000

3500

4000

Stock Price

Figure 3: Scatter plot of the Stock Price versus the Earnings per Share.

After the analysis of the data, we should be able to conclude that earnings per share, book
value and return on equity positively affect the stock price of the companies that we selected for
the study.

Assumptions:
1st Assumption: Linearity.
Using SPSS and Excel, we plotted the independent variables, which are earnings per share
EPR, book value and return on equity ROE (%) against the dependent variable which is the stock
price separately in three different graphs. From the three graphs, we were able to conclude the
linearity.
Please refer to Appendices B and C for the linearity graphs.
2nd Assumption: Normal Distribution.

Figure 4: Histogram of the Frequency versus the Regression Standardized Residual.

The figure above shows a histogram of frequency vs. regression-standardized residuals. The
graph demonstrates that the residuals are normally distributed.
3rd Assumption: Independence of errors.
Durbin-Watson: We have found that Durbin-Watson = 1.953 close to 2
Which means that we do not have a positive autocorrelation.
4th Assumption: Equality of variances.
Using SPSS, the graphs confirm that there is no pattern of residual errors. (See Appendix C).
6

3. Methodology and Findings:


Methodology:
To reach the objective of our project, we have conducted a research in order to know what
are the factors influencing the stock price of the Moroccan firms. We have conducted a multiple
regression analyses by using the statistical tools we have learned throughout this semester. The
way our team have preceded is as followed:
Looking for the factors influencing the stock price of companies in other
countries.
Select only the factors that are significant to our study and applicable to the
Moroccan context.

Dependent variable:
Y: Stock price is the price of a single share of a number
of saleable stocks of a company, derivative or other
financial asset.

Independent variables:
X1: Book value is a measure of all of a company's
assets: stocks, bonds, inventory, manufacturing
equipment, real estate, etc.
X2: Return on equity (%) effectively measures how
much profit a company can generate on the equity
capital investors have deployed in the business, and can
be used over time to evaluate changes in a companys
financial situation. In other words, Return on Equity
indicates the amount of earnings generated by each
dollar of equity.
X3: Earnings per share is the amount earned on behaves
of each outstanding common stock not the distributed
amount to shareholders. This is perhaps the most
important factor for deciding the health of any company
and they influence the buying tendency in the market. It
can measure the profitability of the company.
Plot the data and run the regression through SPSS software and Excel also.
Make sure that we met all four assumptions.
Analyze and interpret all the output results.
Conclusion.
Findings:
Multiple Regression Analysis:
Empirical Model:
Stock Price = 0 + 1 (Book Value) + 2 (Return on Equity) + 3 (Earnings per share) +

Interpretations:
Table 1: Multiple Regression Table using Excel.
Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

-34,9231

120,8476

-0,2890

0,7745

-281,3933

211,5472

Book Value

171,1294

37,2119

4,5988

0,0001

95,2353

247,0235

Return on Equity (%)

-19,4181

8,7620

-2,2162

0,0342

-37,2884

-1,5478

15,8461

1,1718

13,5231

0,0000

13,4562

18,2360

Earnings per Share

From Table 1, we can get the following multiple regression equation:


= 34,9231 + 171,1294 X1 19,4181 X2 +15,8461 X3

b0: When all the independent variables: the book value, return on equity and earnings per
share are equal to zero, the stock price is equal to 34,9231.
b1: If the book value decreases by one precent (holding all the other independent variables
constant), the stock price decreases by 171,1294.
b2: If the return on equity increases by one precent (holding all the other independent
variables constant), the stock price increases by 19,4181.
b3: If the earnings per share increase by one precent (holding all the other independent
variables constant), the stock price increases by 15,8461.
R and R adjusted:

Table 2: Table of R and R adjusted generated by SPSS software.


Adjusted R
Std. Error of the
Square
Estimate
Model
R
R Square
1

0,934

We know that:

0,873

0,861

325,10701

From the table, R = 0,873 which means that 87.3% of the variability in the companys stock
price is explained by the variation in book value, return on equity, and earnings per share of this
company.
=

( )()
()

From the table, R adjusted = 0,861 meaning that 86.1% variance in the stock price is
explained by the multiple regression model adjusted of book value, return on equity, and the
earnings per share.
8

F-Test:
H0: 1 = 2 = 3 = 0 (There is no linear relationship between book value, return on equity
and earnings per share).
H1: At least one j is different from zero (at least one independent variable affects the stock
price).

Table 3: Simple Regression Table using Excel.


ANOVA
df

SS

Regression

MS

22543967,53

7514655,84

Residual

31

3276531,61

105694,57

Total

34

25820499,13

We know that:

F
71,10

Significance F
5,42E-14

with: MSR = 7514655.84 and MSE = 105694,57

FSTAT = 71,10
For FCRIT, we consider = 0,05, and since k = 3 the degrees of freedom are 3 and 31:
FCRIT(0,05; 3; 31) = 2.92
Therefore, since FSTAT > FCRIT: We Reject H0. Thus, there is sufficient evidence of a
significant relationship between the stock price and the three independent variables.
T-Test:
Table 4: Multiple Regression Table for t Stat using Excel.
Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Intercept

-34,9231

120,8476

-0,2890

0,7745

-281,3933

211,5472

Book Value

171,1294

37,2119

4,5988

0,0001

95,2353

247,0235

Return on Equity (%)

-19,4181

8,7620

-2,2162

0,0342

-37,2884

-1,5478

15,8461

1,1718

13,5231

0,0000

13,4562

18,2360

Earnings per Share

We use the t-test:

We already have the results of TSTAT of each variable from Table 4, so we will compare each
one with the critical value to give the appropriate interpretations.
The critical value will be the same for the three variables, we consider /2= 0.025, df = 33:
TCRIT(0,025; 33) = 2.0345
9

Test for b1:


Ho: 1= 0 (The Book Value does not have a significant effect on Stock Price).
H1: 1 0 (The Book Value has a significant effect on Stock Price).
We have TSTAT = 4,5988
Since, TSTAT > TCRIT(0,025; 33): We Reject H0. Thus, the Book Value has a significant effect on Stock
Price.
Test for b2:
Ho: 2= 0 (The Return on Equity does not have a significant effect on Stock Price).
H1: 2 0 (The Return on Equity has a significant effect on Stock Price).
We have TSTAT = -2,2162
Since, TSTAT = -2.2162 < TCRIT(0,025; 33) = -2.0345: We Reject H0. Thus, the Return on Equity has
a significant effect on Stock Price.
Test for b3:
Ho: 3= 0 (The Earnings per Share does not have a significant effect on Stock Price).
H1: 3 0 (The Earnings per Share has a significant effect on Stock Price).
We have TSTAT = 13,5231
Since, TSTAT > TCRIT(0,025; 33): We Reject H0. Thus, the Earnings per Share has a significant effect
on Stock Price.

Confidence Interval Estimation:


We know that df = 31 and = 0.05.
Test for b1:
b1 tCRIT(0,025; 31)*Sb1
95,235 < 1 < 247,02
Thus, we are 95% confident that 1 will lie between 95,235 and 247,02.

10

Test for b2:


b2 tCRIT(0,025; 31)*Sb2
-37,288 < 2 < -1,548
Thus, we are 95% confident that 2 will lie between -37,288 and -1,548.

Test for b3:


b3 tCRIT(0,025; 31)*Sb3
13,456 < 3 < 18,236
Thus, we are 95% confident that 3 will lie between 13,456 and 18,236.

Durbin Watson Analysis:


Table 5: Table of Durbin Watson factor generated by SPSS software.

Model
1

R Square

Adjusted R
Square

0,934

0,873

0,861

Std. Error of the


Estimate
Durbin-Watson
325,10701

1,953

Ho: There is no positive autocorrelation among residuals.


H1: There is a positive autocorrelation among residuals.
D = =

((())^)
(^ )

DSTAT = 1.953

We have n = 35, k = 3 and = 0.05


So: Dlower = 1,28 and Dupper = 1,65
Since 1,65 < 1.953 < 2, we fail to reject H0. Thus, there is no positive autocorrelation among
residuals.

11

4. Conclusion:

The research we conducted on what factors affect the stock price of companies lead us to find
other variables like dividend, market capitalization, variances and others. However, our research
enabled us to choose only three independent variables due to the non-significance and nonavailability of some data of some Moroccan firms that we were interested on. Therefore, our
dependent variable was the stock price and the independent variables were the book value, the
return on equity and earnings per share. We have taken the financial key indicators from
Casablancas Stock Exchange official website, as all the necessary information were listed there.
Statistical tools learned in class have been very helpful and were used to demonstrate how the
stock price is influenced by the variables stated above in our study. Moreover, we have used
SPSS and Excel software to generate the necessary information. The generated graphs and tables
allowed us to give a good interpretation of our collected data. Our regression model is:
Stock Price = 0 + 1 (Book Value) + 2 (Return on Equity) + 3 (Earnings per share) + (Error)

All our chosen independent variable were significant as the p-value was less than our
significance level . Also, our R= 0.873 meant that 87.3% of the variability in the stock price is
explained by the variation in earnings per share, return on equity and book value of the same
corporation.

12

Literature Cited

AL Khalaileh, M. The Relationship between Accounting Performance Indexes and Market Performance Indexes,
An Applied Study on Listed Corporations at Amman Security Exchange, Administrative Sciences Studies Magazine,
Jordan University, Amman, issue 1, 2001.
A.Seetharaman :An Empirical study on the impact of earning per share on stock prices of a listed bank in
Malaysia. The International Journal of Applied Economics and Finance. 2011
Casablanca Stock Exchange. Cours des valeurs. Retrieved November 23, 2014 from: http://www.casablancabourse.com/bourseweb/Cours-Valeurs.aspx?Cat=24&IdLink=300
Sharma, S. (2011), Determinants of equity share prices in India, Journal of Arts, Science & Commerce, 2(4): 5160.
Srivastava, R. M. (1984), Testing Modigliani - Millers Dividend Valuation Model in Indian Context - A Case Study
of 327 Joint Stock

13

APPENDIX A Data Set


Company Name

Stock Price

Book Value

1860,00

2,89

19,83

116,14

371,95

1,15

11,08

47,41

1035,00

1,40

12,58

101,12

70,00

3,34

8,88

1,83

341,90

1,64

10,92

20,35

85,00

2,24

12,79

4,52

AUTO NEJMA

1760,00

2,48

15,76

91,49

AXA CREDIT

350,00

1,28

7,92

24,56

BALIMA

121,00

2,95

14,78

7,65

BCP

217,55

0,97

5,66

11,27

BMCE BANK

223,25

1,92

6,43

6,86

BMCI

760,00

1,24

7,54

48,19

2250,00

4,44

18,73

94,88

18,55

1,11

5,76

0,93

550,00

1,49

6,59

26,95

1450,00

9,89

16,31

23,41

CGI

725,00

3,23

8,18

19,93

CIH

344,95

1,44

10,74

19,35

CIMENT DU MAROC

965,00

1,98

13,05

56,03

76,89

1,62

14,41

5,34

1700,00

2,28

17,53

150,01

329,00

0,93

12,69

28,55

31,00

1,64

8,45

1,64

EQDOM

1550,00

2,00

11,51

106,56

HOLCIM (Maroc)

2498,00

2,18

11,42

76,28

116,50

4,23

27,79

6,30

LABEL VIE

1349,00

2,90

4,39

21,98

LAFARGE CIMENTS

1713,00

4,50

27,36

79,98

LESIEUR CRISTAL

102,00

1,97

8,56

4,52

LYDEC

393,00

1,58

17,66

36,98

MAGHREB OXYGEN

136,00

0,53

3,52

8,93

MICRODATA

139,00

2,60

38,00

17,98

NEXANS MAROC

190,00

0,49

1,50

4,44

OULMES

874,50

3,22

15,35

40,10

3700,00

2,38

17,68

222,86

AFRIQUIA GAZ
ALLIANCES
ALUMINIUM DU MAROC
ATLANTA
ATTIJARIWAFA BANK
AUTO HALL

BRASSERIES DU MAROC
CARTIER SAADA
CDM
CENTRALE LAITIERE

COLORADO
COSUMAR
CTM
DELTA HOLDING

ITISSALAT AL-MAGHRIB

WAFA ASSURANCE

14

Return on Equity (%)

Earnings per Share

APPENDIX B Excel Data Output

SUMMARY OUTPUT
Regression Statistics
Multiple R

0,934400062

R Square

0,873103475

Adjusted R Square

0,860823166

Standard Error
Observations

325,10701
35

ANOVA
df
Regression

SS

MS

22543967,53

7514655,84

Residual

31

3276531,61

105694,57

Total

34

25820499,13

Coefficients

Standard Error

t Stat

F
71,10

P-value

Significance F
5,42E-14

Lower 95%

Upper 95%

Intercept

-34,9231

120,8476

-0,2890

0,7745

-281,3933

211,5472

Book Value

171,1294

37,2119

4,5988

0,0001

95,2353

247,0235

Return on Equity (%)

-19,4181

8,7620

-2,2162

0,0342

-37,2884

-1,5478

15,8461

1,1718

13,5231

0,0000

13,4562

18,2360

Earnings per Share

15

RESIDUAL OUTPUT

PROBABILITY OUTPUT

Residuals

Standard
Residuals

Observation

Predicted Stock Price

2391,9268

-691,9268

-2,2289

1,4286

18,55

207,6075

-105,6075

-0,3402

4,2857

31

57,9194

-39,3694

-0,1268

7,1429

70

1711,7952

-261,7952

-0,8433

10,0000

76,89

393,2150

-323,2150

-1,0412

12,8571

85

3560,5155

139,4845

0,4493

15,7143

102

356,1520

-14,2520

-0,0459

18,5714

116,5

277,4914

-54,2414

-0,1747

21,4286

121

794,4887

-34,4887

-0,1111

24,2857

136

10

199,7517

17,7983

0,0573

27,1429

139

11

519,1471

30,8529

0,0994

30,0000

190

12

309,5752

35,3748

0,1140

32,8571

217,55

13

938,3644

26,6356

0,0858

35,7143

223,25

14

1325,1252

1172,8748

3,7782

38,5714

329

15

1471,2520

241,7480

0,7787

41,4286

341,9

16

1562,7365

-527,7365

-1,7000

44,2857

344,95

17

1864,6691

385,3309

1,2413

47,1429

350

18

47,1103

29,7797

0,0959

50,0000

371,95

19

724,4042

624,5958

2,0120

52,8571

393

20

697,9872

-326,0372

-1,0503

55,7143

550

21

674,7979

50,2021

0,1617

58,5714

725

22

1914,9467

-54,9467

-0,1770

61,4286

760

23

478,5271

-85,5271

-0,2755

64,2857

874,5

24

419,5117

-69,5117

-0,2239

67,1429

965

25

107,6341

-76,6341

-0,2469

70,0000

1035

26

249,1566

-132,6566

-0,4273

72,8571

1349

27

330,2181

-1,2181

-0,0039

75,7143

1450

28

90,1599

99,8401

0,3216

78,5714

1550

29

853,4749

21,0251

0,0677

81,4286

1700

30

128,9296

7,0704

0,0228

84,2857

1713

31

171,6740

-86,6740

-0,2792

87,1429

1760

32

1533,2088

226,7912

0,7306

90,0000

1860

33

304,1323

-183,1323

-0,5899

92,8571

2250

34

-42,9604

181,9604

0,5862

95,7143

2498

35

1772,3943

-222,3943

-0,7164

98,5714

3700

16

Percentile

Stock Price

1500

Residuals

1000

500

10

12

-500

-1000

Book Value
Figure 1: Scatter plot of Book Value versus Residuals

1500

Residuals

1000

500

0
0

10

15

20

25

30

-500

-1000

Return on Equity (%)


Figure 2: Scatter plot of Return on Equity (%) versus Residuals

17

35

40

1500

Residuals

1000

500

0
0

50

100

150

200

250

-500

-1000

Earnings per Share


Figure 3: Scatter plot of Earnings per Share versus Residuals

4000
3500

Stock Price

3000
2500
2000
1500
1000
500
0
0

20

40

60

80

100

120

Sample Percentile
Figure 4: Scatter plot of Stock Price versus Sample Percentile (Normal Probability Plot)

18

APPENDIX C SPSS Data Output

19

20

21

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