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DESIGN OF EXPERIMENTS AND DATA ANALYSIS IN FINANCE FACTORS EFFECTING STOCK RETURNS

2. Why Finance?. DOE is not specific for engineering applications. Finance is also application area for DOE. Today, investors are not satisfied with fixed income securities. They became risk takers in order to gain extra returns. Stocks are the major security that risk taker investors prefer. DOE is a good tool for examining the volatility in stock returns..

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DESIGN OF EXPERIMENTS AND DATA ANALYSIS IN FINANCE FACTORS EFFECTING STOCK RETURNS

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    1. DESIGN OF EXPERIMENTS AND DATA ANALYSIS IN FINANCE “FACTORS EFFECTING STOCK RETURNS” Bilgen ÖZTÜRK Noyan ZÜMBÜLCÜ Onur METE

    2. 2 Why Finance? DOE is not specific for engineering applications. Finance is also application area for DOE. Today, investors are not satisfied with fixed income securities. They became risk takers in order to gain extra returns. Stocks are the major security that risk taker investors prefer. DOE is a good tool for examining the volatility in stock returns.

    3. 3 VARIABLES RESPONSE VARIABLE: Monthly Stock Returns The return of stocks from ISE (IMKB) between 1998 - 2001 Firms which are not available in stock exchange market in the evaluation period and having missing monthly return data are eliminated from the analysis.

    4. 4 VARIABLES FACTORS: Years From 1998 to 2001 Months 48 months for 4 years Months are nested in years.

    5. 5 VARIABLES FACTORS: Firm Size It is measured via Market Capitilization value Average of monthly Mcap values are used to classify the firms in terms of firm size as “SMALL – MEDIUM – LARGE”

    6. 6 VARIABLES FACTORS: P/E Ratio The current share price divided by earning per share. In general, low P/E ratio indicates a lower valued stock. Average of monthly P/E ratios are used to classify the firms having “SMALL – MEDIUM – LARGE” P/E ratio.

    7. 7 DATA DATA SOURCE: Analiz Yatirim Arastirmalari A.S. The firms that have missing data are eliminated from the analysis. Number of companies analyzed :

    8. 8

    9. 9 DESIGN OF EXPERIMENTS Nested Design with Factorials

    10. 10 Analysis

    11. 11 Analysis

    12. 12 Analysis

    13. 13 Analysis

    14. 14 Conclusion The main effects of the model(Year, months nested in years, firm size) except from the P/E ratio effect are significant. There are also some interaction effects on the response (return). These are Year*FirmSize FirmSize*Month(Year)

    15. 15 Conclusion (Cont’) For the stock investors, the firm size is important in their decisions. On the other hand, the P/E ratio do not effect the stock returns so the investors do not have to consider this ratio in their investment decisions.

    16. THANK YOU Bilgen ÖZTÜRK Noyan ZÜMBÜLCÜ Onur METE

    17. 17 1-2-3-10-11: N 4-5-6-12-13:B 7-8-9-14-15:O

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