Track: Undergraduate Student Paper Competition

Abstract

This paper presents an analysis of the trends of financial ratios of one hundred fifty (150) companies that are currently listed in the Philippine Stock Exchange with the aim of helping equity investors in their investment strategies. Examining the annual company financial reports, a set of criteria was set in order to determine whether certain companies can be deemed equitable by investors. Stocks that passes the set criteria are added into a portfolio following an equally weighted strategy. The portfolio performance is then compared with the market index (Philippine Stock Exchange) which shows that the resulting portfolio can outperform the market. In addition, individually considering each ratio as the criteria of selecting stocks into the investment pool results to portfolios with negative returns. This implies that the portfolio selection with the proposed criteria is superior to the portfolio selection considering each ratio as the selection criteria.  Overall, although white noise may occur in the stock market, this research provides investors with an unbiased forecast reference to help them evaluate their stock picks and build their investment portfolios.