The Relationship of Earnings and Book Values to Equity Values: Evidence from Turkey - Economic Research Forum (ERF)

In this study, we examine factors associated with equity valuation in a newly emerging market, Turkey.  In the United States and other developed countries, research indicates that both earnings and book value are important predictors of equity valuation. In Turkey, earnings appear to have information content, but earnings appear to be declining in importance over time. Book value adjusted for inflation has a stronger association with equity values. In the inflationary and risky environment of Turkey, where future value of earnings is quite uncertain, investors may be paying less attention to earnings. Our study also indicates that, overall, earnings and inflation-adjusted book values combined virtually explain almost 75 percent of the variation in equity prices. This is much higher than results using U.S. data where the maximum R2 for pooled data is 15 percent.

Asokan Anandarajan

Research Fellows

Ihsan Isik

Full Professor of Finance, Rowan University

Ebru Isik



There are no Events PAST

Related Publications

Working Papers

Arab Geopolitics in Turmoil: Implications Of Qatar-Gulf Crisis for Business

Jamal Bouoiyour and Refk Selmi

On June 5, 2017 Saudi Arabia, the United Arab Emirates, Egypt and Bahrain (known as ... read more

Working Papers

An optimal early warning system for currency crises under model uncertainty

Mamdouh M. Abdelsalam and Hany Abdel-Latif

This paper assesses a number of early warning (EWS) models of financial crises with the ... read more

Working Papers

Sukuk Market Development and Islamic Banks’ Capital Ratios

Houcem Smaoui and Hatem Ghouma

This paper investigates the impact of Sukuk market development on Islamic banks’ capital ratios ... read more