THE RELATIONSHIP BETWEEN PROFITABILITY AND THE STOCK RETURN
DOI:
https://doi.org/10.61841/d458m262Keywords:
Profitability, Stock Return, Return on Equity (ROE), Net Profit Margin (NPM), Operating Profit Ratio (OPR), Istanbul Stock Exchange (ISE), Regression Analysis, Emerging Markets, Financial Performance, Turkish Manufacturing SectorAbstract
This study investigates the relationship between key profitability indicators—Net Profit Margin (NPM), Operating Profit Ratio (OPR), and Return on Equity (ROE)—and stock returns in Turkish manufacturing firms listed on the Istanbul Stock Exchange (ISE) during the period 2010–2020. Using a panel dataset of 10 firms and applying descriptive statistics, correlation analysis, and regression modeling, the study finds no statistically significant relationship between profitability metrics and stock returns. Although NPM and OPR are positively correlated with ROE, these associations do not translate into statistically significant regression results. The study highlights the complexity of interpreting profitability in emerging markets, suggesting that accounting-based indicators may lack explanatory power over stock performance due to market inefficiencies, investor behavior, and macroeconomic volatility. The findings call for multidimensional analyses and more advanced econometric techniques in future research.
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