International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online)

The Effect of Market Valuation Measures on Stock Price: An Empirical Investigation on Jordanian Banks
Lina Hani Warrad

The recognition of vital sectors in the stock exchange and the identification of the dynamic variables affecting stock prices occupy an important position in the growth and development of the stock exchange. They also play an important role in dynamic issues of securities exchanges. The estimation of market valuation indicators and their impact on stock price is expected to help in true deal, and these result in closing the deal price of stocks to their normal prices. Actually, constancy will occur in a capital market when pricing equilibrium is formed in a market of capital, and it just happens with practical use of good and rational methods manner to price share. (Nazemi M., 2012) This study attempted to determine the effect of major market valuation measures on Jordanian banks’ stock prices during the period of 2008–2014; the study applied correlation and multi-regression methods to test its hypotheses. The independent variables for the study are earnings per share (EPS), dividend per share (DPS), book value per share, price/earnings ratio (P/E), dividend yield, market/book ratio and stock turnover ratio; the dependent variable is the stock price. The results of the study show that market valuation measures have a significant effect on banks’ stock prices. Dividends per share (DPS), book value per share and dividend yield also had a significant effect on stock price, while there was no significant effect caused by EPS, P/E, market/book ratio or stock turnover ratio.

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