THE RELATIONSHIP BETWEEN FUNDAMENTAL SIGNALS AND FUTURE EARNINGS

This paper examines the relationship between detailed financial statement data (fundamental signals) and the future earnings. We focus on the impact of the economic intuition underlying fundamentals signals. Factor analysis summarizes the selected fundamental signals to three factors: profitability, investment and labor. The regression results show fundamental signals significantly explain the future earnings. Furthermore, the profitability signals and investment signals show a strong relationship with the future performance.