Excess Returns in Hospitality Stocks

Performance of hospitality stocks and financial ratios are relatively well discussed topics in hospitality finance. The current study contributes to the body of knowledge by attempting to identify if certain groups of hospitality stocks continually outperform market and if selected financial ratios can predict excess returns. Hospitality stocks betas were computed and most recent five-year annual returns were utilized for analysis. Study used Jensen’s alpha to determine excess returns for various hospitality segments studied. Six major ratios were operationalized to determine the predictability of excess returns in hospitality stocks. Overall, the excess returns in hospitality company stocks were positive but no significance was found with an exception of one year. Out of six selected ratios, cash flow per share was determined to have significant predictive power for excess returns. In conclusions, study provides important implications for the investors and industry decision makers. 

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