A Study on the pertinency between common stock returns and corparate performance -An application on Istanbul Stock Exchange-

ABSTRACT Common stocks returns are expected to be determined by financial factors at efficient stock markets. In capital markets theories, it is accepted that there exist a linear relationship between common stock returns and corporate performance. The study attempts to investigate the existence of this linear relationship. The conslusion to be reached is very important since it demonstrates whether financial indicators of firms affect common stock returns and how closely real economy and monetary economy are interrelated. A multivariate analysis using financial ratios is conducted within the theoretical frame work of fundemantal analysis. The results of the analysis show that the Spearman Rank Correlation coefficients between the ranking of common stocks returns and the ranking of corporate performance are quite low. Consequently, it is concluded that no linear relationship exists between the two variables. VIII