Finance and Financial Management Commons^™

The Role Of Earnings And Book Values In Pricing Stocks: Evidence From Turkey, Asokan Anandarajan, Iftekhar Hasan, Ihsan Isik, Cornelia Mccarthy

CRIF Working Paper series

In this study, we examine factors associated with equity valuation in a newly emerging market, Turkey. In the United States and other developed countries, research indicates that both earnings and book value are important predictors of equity valuation. In Turkey, earnings appears to have information content but earnings, by itself, appears to be declining in importance over time. Book value adjusted for inflation has a stronger association with equity values. In the inflationary and risky environment of Turkey, where future value of earnings is quite uncertain, investors may be paying less attention to earnings and more attention to book values. …