The Relation between Average Stock Return to Earning Ratio and Book to Market Ratio in FTSEBM

Malaysia stock market is an emerging market in Asia. Recently, Malaysia has implemented some liberalizations in the stock market. Malaysia stock market is a potential market to get high profits. Many local as well as foreign investors would be interested to know whether the Malaysian stock returns could predicted by financial ratios. The main purpose of this study is to investigate the ability of price to earning and book-to-market ratios to predict future stock market returns in FTSEBM. A linear regression analysis is applied for this purpose. Findings reveal that book to market ratio significantly influences stock return,while there is no significant positive linkage between price to earning ratio and stock return.