Factors Associated with Stock Price Volatility and Evaluation of Gordon's Share Valuation Model on the Kuala Lumpur Stock Exchange

Mohamad, Shamsher and Md Nassir, Annuar (1993) Factors Associated with Stock Price Volatility and Evaluation of Gordon's Share Valuation Model on the Kuala Lumpur Stock Exchange. Pertanika Journal of Social Sciences & Humanities, 1 (2). pp. 179-186. ISSN 0128-7702

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Abstract

The worldwide increase in share price volatility in recent years has stimulated an abundance of research in an effort to understand individual share price volatility in international markets. The objectives of this study are: (i) to isolate factors suggested by investment theories and practices and to observe their ability to jointly explain share price volatility on the developing Kuala Lumpur Stock Exchange (KLSE) and (ii) to evaluate the applicability of Gordon's share valuation model on the KLSE. The findings suggest that five of the six suggested variables jointly explain 23 per cent of price changes on the KLSE for the period 1975 to 1990, and two of these factors were significant at 5 per cent level. Gordon's model holds well with F-statistics significant at 5 per cent level, R-squared is 70 per cent, and the signs of the coefficient of dividend and earnings growth variables are in the predicted direction. Contrary to popular belief, fundamental factors appear to be a significant force influencing share price changes on the KLSE.

Item Type:Article
Keyword:Share price volatility, share valuation model, dividend yield, payout ratio, earnings variability, asset growth, debts to asset ratio, firm size, return to equity
Faculty or Institute:Faculty of Economics and Management
Publisher:Universiti Putra Malaysia Press
ID Code:2944
Deposited By: Nur Izyan Mohd Zaki
Deposited On:19 Nov 2009 07:08
Last Modified:27 May 2013 07:04

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