Low Price, Price‐earnings Ratio, Market Value, and Abnormal Stock Returns

Tseng, K. C.

doi:10.1111/j.1540-6288.1988.tb01271.x

Cited by 16 publications

(11 citation statements)

References 22 publications

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“…Similar results (i.e. insignificant coefficients) have also been shown by Tseng (1988), Chung, Johnson and Schill (2006), Lhabitant and Gregoriou (2008, Note:…”

Section: Findings and Discussionsupporting

confidence: 83%

Industry competition and common stock returns

Senarathne¹,

Wei²

2019

Management Sciences

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This paper examines the relationship between industry competitiveness and common stock returns of twenty listed firms of the Colombo Stock Exchange. The Herfindahl (1950) H index is extended to include the variance of cross sectional earnings dispersion that accounts for the relative competition of an industry. The regression results show that the industry competitiveness is unrelated to common stock returns when the extended H index is included in the regression specification as a common factor. Although the overall market factor (i.e. market return) remains statistically significant, coefficients of extended H index together with two other controlled factors become statistically insignificant in the regression. These findings suggest that the risk pertaining to industry competition is not priced as it could be diversified away by the appropriately managed value chain of the individual firms and, as such, no compensation for the risk of industry competition is demanded.

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“…Similar results (i.e. insignificant coefficients) have also been shown by Tseng (1988), Chung, Johnson and Schill (2006), Lhabitant and Gregoriou (2008, Note:…”

Section: Findings and Discussionsupporting

confidence: 83%

Industry competition and common stock returns

Senarathne¹,

Wei²

2019

Management Sciences

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“…This result contradicts some early American evidence on low PIE effect. However, it is consistent with conclusions by Elfakhani and Bishara (1991), Cooke and Rozeff(1984) and Tseng (1988) that PIE ratio acts as a proxy for the size effect. IS A close examination of the last two panels of Table 3 shows that the performance of market portfolio consistently dominates other portfolios.…”

Section: Findings and Interpretationssupporting

confidence: 92%

Portfolio Performance and the Interaction Between Systematic Risk, Firm Size and Price‐earnings Ratio: The Canadian Evidence

Elfakhani¹

1993

Rev Financ Econ

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While some American studies relate portfolio performance to PIE ratios, others reject such a hypothesis orfind evidence ofa confounded PIE-size effect. This prevents conclusive inferences. Canadian markets are structurally differentfrom American ones; thus American evidence may not apply to Canadian stocks. This study examines how interaction between PIE ratio, beta and firm size affects the portfolio performance of Canadian stocks. The results show a relative support for the firm size effect, even after proper adjustment for risk and alternate change in control variables. This evidence is not uniform across different quarters of the year but not restricted to year-end effect. The findings also demonstrate a positive correlation among the three variables. However, one cannot generalize conclusions since the analysis may not capture all other pertinent factors.

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“…Basu (1983) enhanced his previous research and found that high Earnings Price (low PE) stocks earned significantly greater risk adjusted returns even after controlling for firm size. Tseng (1988) and Jaffe et al (1989) found similar results which show that low PE ratio portfolios have higher risk adjusted return than high PE ratio portfolios. Fama & French (1992) also found positive abnormal returns related with low PE stocks.…”

Section: Literature Reviewmentioning

confidence: 65%

“…Using NYSE common stocks as sample of analysis, Basu (1977Basu ( , 1983 confirmed by Jaffe et al (1989) found that stocks with high (low) PE ratios generate lower (higher) returns. Tseng (1988) conclude that low PE ratio portfolios are found to have higher risk adjusted return than high PE ratio portfolios. Trevino & Robertson (2002), using US stock market data, found that current PE ratios are useful in estimating long-term average stock returns but not for shortterm average stock returns.…”

Section: Introductionmentioning

confidence: 76%

Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange)

Liem¹,

Basana²

2012

jmk

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Stocks with low PE ratio are perceived as having cheaper current price hence expected to generate higher return in subsequent period. This paper aimed to examine stocks with high PE Ratio followed by low stocks return and on the contrary. Using stocks which are included as member of Liquidity 45 in period 2005-2010 as samples Results showed that there is significance difference between low PE and high PE portfolio stock return in short term (holding period of six months) but there is no significance difference if they are hold for one, two, three, and four years. This research also finds that there is no significant relationship between stock return and trailing PE Ratio.

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Low Price, Price‐earnings Ratio, Market Value, and Abnormal Stock Returns

Cited by 16 publications

References 22 publications

Industry competition and common stock returns

Industry competition and common stock returns

Portfolio Performance and the Interaction Between Systematic Risk, Firm Size and Price‐earnings Ratio: The Canadian Evidence

Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange)

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