Price Earning Ratio and Market to Book Ratio
AbstractThis paper studies the effects of P/E ratio and M/B ratio on stock return of listed firms with Karachi Stock Exchange in the Textile sector of Pakistan. A total of 30 major firms out of 162 in the textile sector listed with the Karachi Stock Exchange for the period of 2001-2006 were selected on the basis of their size in terms of total assets. Firms which have larger size in terms of total assets among 162 firms were selected in this paper. The study reveals that the firms in an exclusive sector exhibit unique attributes that are sector specific and cannot be applied to or judged by combined analysis of the industry. The result shows that coefficients of independent variables are statistically insignificant. This means that stock return is not depending on any of the two independent variables. Besides insignificant coefficients, coefficients of determination are also very low in each case. This means that a very low percentage of change in stock return is explained by these two variables. The data was analyzed by running linear regression. Two independent variables i.e. P/E ratio and M/B ratio were selected to see their effects on stock return. Multiple regression models along with a measure of correlation were used to study the effect of the independent variables on the dependent variable. The results for the study revealed that stock return is independent of the two independent variables studied in this paper.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 23969.
Date of creation: 2009
Date of revision:
Publication status: Published in IUB Journal of Social Sciences and Humanities 2.7(2009): pp. 103-112
P/E Ratio; M/B Ratio; Stock Return; Fundamental Analysis;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Louis H. Fritzemeier, 1936. "Relative Price Fluctuations of Industrial Stocks in Different Price Groups," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 9, pages 133.
- Pinches, George E. & Simon, Gary M., 1972. "An Analysis of Portfolio Accumulation Strategies Employing Low-Priced Common Stocks," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 7(03), pages 1773-1796, June.
- Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, American Finance Association, vol. 48(1), pages 65-91, March.
- Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 47(2), pages 427-65, June.
- Rozeff, Michael S. & Kinney, William Jr., 1976. "Capital market seasonality: The case of stock returns," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 379-402, October.
- Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 45(3), pages 444-55, July.
- Jegadeesh, Narasimhan, 1990. " Evidence of Predictable Behavior of Security Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 45(3), pages 881-98, July.
- Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, Elsevier, vol. 9(1), pages 3-18, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.