Abstract
This paper examines the efficacy of financial ratios as predictors of stock performances of 20 selected companies listed on the Ghana Stock Exchange Composite Index (GSE-CI) over a three year period. Stock portfolio selection is one of the biggest challenges faced by market players when investing on the stock exchange. This study uses binary logistic regression with various financial ratios as the explanatory variables to investigate indicators that significantly influence the performance of stocks actively traded on the Ghana Stock Exchange-Composite Index (GSE-CI). Potential performance of a stock on the Exchange is invaluable information to an investor. The study showed that using financial ratios, companies’ annual performance on the GSE-CI can be predicted with a 70% level of accuracy into two categories – “good” or “poor” – based on whether or not that particular company outperforms the GSE-CI. This paper maintains that the model developed can enhance the stock performance forecasting ability of investors