Does Fundamental Analysis Predict Stock Returns? Evidence from Non-Financial Companies Listed on KSE

Present study aims at investigating whether historical accounting data (fundamental analysis) can predict future stock returns. The paper goal is to show the predictive quality of fundamental analysis and FSCORE in Pakistan. This paper use five signals from five different areas of; profitability ratios, efficiency ratios, liquidity ratios, leverage ratios, and market based ratios for the study. Data were selected for ten year period from 2000 to 2009. The sample of the study consists of all non-financial companies listed on Karachi Stock Exchange having ten years consecutive data are available. For data analysis the study used ordinary least square (OLS). The study found that fundamental analysis cannot predict stock returns in Pakistani listed companies. The study found that FSCORE has insignificant relation with stock returns of Pakistani listed companies.