Académique Documents
Professionnel Documents
Culture Documents
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.
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
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
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.
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
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
-19,4181
8,7620
-2,2162
0,0342
-37,2884
-1,5478
15,8461
1,1718
13,5231
0,0000
13,4562
18,2360
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:
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).
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
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
-19,4181
8,7620
-2,2162
0,0342
-37,2884
-1,5478
15,8461
1,1718
13,5231
0,0000
13,4562
18,2360
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
10
Model
1
R Square
Adjusted R
Square
0,934
0,873
0,861
1,953
((())^)
(^ )
DSTAT = 1.953
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
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
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
-19,4181
8,7620
-2,2162
0,0342
-37,2884
-1,5478
15,8461
1,1718
13,5231
0,0000
13,4562
18,2360
15
RESIDUAL OUTPUT
PROBABILITY OUTPUT
Residuals
Standard
Residuals
Observation
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
17
35
40
1500
Residuals
1000
500
0
0
50
100
150
200
250
-500
-1000
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
19
20
21