Do The Financial Fundamentals Affect The Stock Returns?

The study aims to determine the relationship between fundamental financialindicators and their impact and influence on the stock return in TASI Saudi Stock Market.The case study is including24listed companies in the Insurance sector; the study attemptsto examine and analyze the companies’ financial changes for four years from2010-2013.Panel Data analysis, including fixed effects model, random effects model and pooled OLSmodel analyses were implied to model and find the relationship between dependentvariable (i.e. stock return) and explanatory variables (i.e. Return on Equity (ROE), Returnon Assets (ROA) and financial leverage (LEVERAGE)). The analyses is implied in orderto find whether the stock prices over a period of time or annual stock returns are affectedby the most valuable financial performance fundamentals or each of the stock returns andthe financial fundamentals are not associated and have correlation. The study illustratedthat the stock return is not affected by financial indicators, and insurance sector in TASI isnot to be considered as efficient market according to the sample studied.