KEY FUNDAMENTAL FACTORS AND THE LONG RUN STOCK PRICE CHANGES

This paper reports new findings on the joint effect six theory-suggested fundamental variables have on share price changes of industrial firms. The novelty in this paper is identifying the joint effect multiple factors exert in the long run on share prices. The highly significant joint factors are dividend yields, earnings, leverage and firm size. which are variables widely acknowledged in finance theories and in practice as price relevant factors. These four factors explain three-fifth of the variation in the US share prices. However, two theory-suggested factors namely asset growth and payout ratio appears to be insignificant in our tests. This is a preliminary study employing a limited sample of homogeneous firms to establish reliable findings using a new joint-effect model.