| This study empirically tests a number of stock pricing models that are based on fundamental variables to determine the extent to which models that link fundamentals to stock prices are supported in Canadian stock markets. Using a cross-section of Toronto Stock Exchange listed firms over the 1992--1996 period, the study documents high explanatory power for stock pricing models based on the following frameworks: Edwards-Bell-Ohlson (EBO), economic profit or economic value created (EVC), price-to-earnings, price-to-sales, and court accepted formulas. The results of this study indicate that fundamental variables play an important role in stock pricing in Canada. Also, findings in this study provide support for the value relevance of two major corporate policy issues: dividend policy and capital structure. |
