Does Price to Book Value Predict Stock Price? Evidence from Nigerian Firms
Journal Title: International Journal of Computational Engineering and Management IJCEM - Year 2016, Vol 19, Issue 1
Abstract
The value a company is usually ascertained based on the markets values of its equity in the markets. Share prices of a company inform the public on the prospect of such stock hence, decisions on purchase or sales is determined. Price to book value multiple is one of the valuation multiples used to predict stock price of companies. However, arguments exist on whether the P/B multiple can be used to predict stock price of Nigerian firms. This study achieve this objective by examining effect of P/B multiple on stock price of 100 firms listed on the Nigerian Stock Exchange (NSE) covering 2009 to 2013 period data. Evidence from the ordinary least square (OLS) results reveals a significant positive relationship between price to book value and stock price of Nigerian listed firms. Therefore, we concludes that price-book value predict stock price of Nigerian listed firms. Hence, recommends the application of P/B value multiple in the prediction of future stock price.
Authors and Affiliations
Isah Shittu, Ayoib Che Ahmad, Zuaini Ishak
Keywords
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