A Fundamental Analysis of Korean Stock Returns

• Published in: Financial analysts journal Vol. 53; no. 3; pp. 75 - 80
• Main Authors: Sandip Mukherji, Manjeet S. Dhatt, Kim, Yong H.
• Format: Journal Article
• Language: English
• Published: Charlottesville The Association for Investment Management and Research 01.05.1997; Taylor & Francis Ltd
• Subjects: Annual reports; Beta; Book value; Business structures; Capital assets; Common stock; Correlation analysis; Earnings; Earnings per share; Equity; Financial analysis; Financial leverage; Financial portfolios; Financial ratios; Growth stocks; Investment risk; Investments; Korea; New stock market listings; Prices; Proxy reporting; Proxy statements; Rates of return; Ratios; Sales; Securities markets; Statistical median; Stock exchanges; Stock prices; Stock returns; Stock sales; Stocks; Studies; Value stocks; Variables; South Korea
• ISSN: 0015-198X; 1938-3312
• DOI: 10.2469/faj.v53.n3.2086

Korea has one of the largest stock markets in the world and is in the process of being opened to foreign investors. In an investigation of the relations between stock returns and fundamental variables in Korea, annual stock returns during the 1982-93 period were positively related to book-market, sales-price, and debt-equity ratios, negatively related to firm size, and not significantly related to the earnings-price ratio or beta. These results add to the growing international evidence that value stocks outperform growth stocks over long periods. Also for Korean stocks, book-market and sales-price ratios are more efficient indicators of value than the earnings-price ratio, and the debt-equity ratio is a more reliable proxy for risk than beta.