Fundamental and macroeconomic information for the security prices valuation: the French case

Summarizes previous research on the links between share prices, accounting earnings and fundamentals (i.e. financial variables); identifies value‐relevant fundamentals used by analysts and assesses their usefulness by using principal components analysis on 1992‐1996 data for 50 French industrial firms. Finds three important factors (profitability ratios, returns/leverage and working capital/financial balance) which can be used in conjunction with two macroeconomic variables (inflation and change in real gross national product) to explain return variability.