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A Price Earnings Index for the Danish Stock Market

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  • Risager, Ole

    (Department of Economics, Copenhagen Business School)

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    Abstract

    Price-earnings ratios are part of the toolkit that is used for assessing the valuation of individual firms on the stock market as well as the entire market itself. This paper presents consistent P/E series for the liquid Danish shares adjusted for share buybacks. The results show that over the period from 1969 to 2003, the average (trailing) P/E equals 13.5. The P/E reaches its lowest level in 1980, which is likely to be due to a soaring oil price, high wage increases and interest rates approaching 20 percent. Notwithstanding optimistic equity pricing also in Denmark in the late 1990s, the upturn in Danish valuations was more moderate than in the US. The correction that sets in subsequently reversed essentially the gains in the Danish P/E in the 1990s.

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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7620
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    Bibliographic Info

    Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 13-2004.

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    Length: 28 pages
    Date of creation: 08 Dec 2004
    Date of revision:
    Handle: RePEc:hhs:cbsnow:2004_013

    Contact details of provider:
    Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
    Phone: 38 15 25 75
    Fax: 38 15 34 99
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    Web page: http://www.cbs.dk/departments/econ/
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    Keywords: Price-earning; ratio;

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    1. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions be Expansionary? Tales of Two Small European Countries," NBER Working Papers 3372, National Bureau of Economic Research, Inc.
    2. Steigum, E.Jr., 1992. "Financial Deregulation, Credit Boom and Banking Crisis: The Case of Norway," Papers 15-92, Norwegian School of Economics and Business Administration-.
    3. Englund, Peter, 1999. "The Swedish Banking Crisis: Roots and Consequences," Oxford Review of Economic Policy, Oxford University Press, vol. 15(3), pages 80-97, Autumn.
    4. Englund, Peter, 1990. "Financial deregulation in Sweden," European Economic Review, Elsevier, vol. 34(2-3), pages 385-393, May.
    5. Josef Lakonishok & Andrei Shleifer & Robert W. Vishny, 1993. "Contrarian Investment, Extrapolation, and Risk," University of Chicago - George G. Stigler Center for Study of Economy and State 84, Chicago - Center for Study of Economy and State.
    6. Barberis, Nicholas & Thaler, Richard, 2003. "A survey of behavioral finance," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128 Elsevier.
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