This paper aims to investigate the relationship between current ratio, earnings to price, net profit margin and stock returns in İstanbul Stock Exchange over the period 2008-2016 by employing panel data analysis. Due to the existence of heteroskedasticity, cross sectional dependence and autocorrelation in the sample data, robust estimators are used to estimate two-way fixed effects model is estimated. Both Parks-Kmenta and Beck-Katz methods are conducted to check whether the results are consistent or not. According to Park-Kmenta estimation model, the results show that earnings to price and net profit margin are significant to explain stock returns in İstanbul Stock Exchange while current ratio is found insignificant. Moreover, the test based on Beck-Katz model produces the similar results. Earnings to price and net profit margin are strong determinants of stock returns in Istanbul Stock Exchange. Stocks with higher E/P ratios and profit margins generate higher returns for the next period.

This study focuses on the relationship between financial ratios and the technology and telecommunication stock returns listed on the Istanbul Stock Exchange. Since technology and telecommunication sector has become an important part of the Turkish economy and is attractive for investors and shareholders, the results play a critical role for all stakeholders. This academic work aims to determine, through the application of panel data analysis, using both the Parks-Kmenta estimator and the Two-way Mixed Effects Model, whether the Price-to-Sales, Earnings per Share (EPS), Debt-to-Equity, and EBITDA Margin financial ratios affect the returns of technology and telecommunication stock returns listed on the Istanbul Stock Exchange. According to empirical findings, Earnings per Share (EPS), EBITDA Margin, and Price-to-Sales ratios have statistically significant effects on technology and telecommunication companies’ stock returns. Higher EPS and EBITDA Margin ratios generate higher returns for the next quarters, and lower Price-to-Sales ratios lead to higher returns for the following periods. Furthermore, the results obtained using the Two-way Mixed Effects Model show that the Debt-to-Equity ratio is negatively related to stock returns.