Prediction of the banking sector index using financial ratios: an empirical study on Amman Stock Exchange
List of Authors
  • Ahmad Abdallah Ahmed Alswalmeh , uradli Ridzwan Shah Mohd Dali

Keyword
  • Islamic finance, financial ratios, banking sector index, Jordanian banks, ASE

Abstract
  • The main purpose of this paper is to predict the banking sector index using financial ratios. The study used yearly data of fourteen banks listed in ASE, during the period between 2005 and 2017. Using ordinary least square method (OLS), seven financial ratios have been tested to predict the banking sector index. The findings revealed that the financial ratios can predict the banking sector index in ASE, and significant relationships were found between debt ratio, stock turnover, return on assets, price to book value and return on equity with the banking sector index in ASE. In contrast, the relationships between the equity ratio and quick ratio with banking sector index in ASE were not significant.

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