Ranking of Financial Ratios

Aimao Zhang, Scott N. Kersey

Research output: Contribution to journalArticlepeer-review

Abstract

Financial ratios have been used in various models to predict stock price since the 1960's (Altman, 1968). A few prominent models include the Piotroski score (Piotroski 2000), Fama-MacBeth regression (Fama & MacBeth, 1973), and the F-R model (Francis & Rowell,1978). Financial ratios used in these models vary from macroeconomic (for example, consumer inflation or the unemployment rate) to financial, such as the quick ratio. This paper is the first effort to rank these financial ratios. In this study, we apply a stepwise analysis of data from 2086 firms to show that out of 32 ratios, 6 ratios are most important for predicting firm performance.

Original languageAmerican English
JournalJournal of International Finance and Economics
Volume15
DOIs
StatePublished - Dec 1 2015

Disciplines

  • Education
  • Mathematics

Keywords

  • Bankruptcy
  • Financial ratios
  • Stepwise analysis
  • Stock
  • Value investment

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