Derivatives - financial ratios link model for Singapore banking stocks - an international perspective

Abstract

A multifactor derivatives-financial ratios link model is used to forecast Singapore top 4 banking stocks. The various independent variables used are net asset backing/net tangible asset(NTA), dividend yields(DY), earnings per share (EPS) , price earnings ratio(P/E}, exchange rate (EX), interest rate (IR) and exchange rate volatility (o). Results show that the double log function best describes the model with dividend yield(DY) and price earnings ratio (PIE) the best contributing factors in predicting the share price and one can be about 95% confident about the prediction.