Valuation, Profitability, and Subsequent Stock Returns: Firm Fixed-Effects Evidence from Taiwan

Abstract

Abstract : This study examines whether valuation ratios and profitability are associated with subsequent-quarter stock returns in Taiwan. The analysis applies firm fixed-effects regressions with quarter fixed effects and firm-clustered standard errors. The results show that ROE is positively related to returns in the following quarter, whereas P/B and P/S are negatively related to subsequent performance. P/E is not statistically significant. Overall, profitability and valuation provide complementary information about short-term stock returns.