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Survey and Market‐based Evidence of Industry‐dependence in Analysts’ Preferences Between the Dividend Yield and Price‐earnings Ratio Valuation Models

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  • Richard G. Barker

Abstract

Prior research has shown that analysts’ preferred valuation models are the price‐earnings (PE) ratio and the dividend yield. This paper presents strong evidence that the relative importance of these two models varies according to stock market sector. Companies in the services, industrials and consumer goods sectors are shown to be ‘PE‐valued’ while financials and utilities companies are shown to be ‘yield‐valued’. These findings are derived from survey research and then tested in a market‐based model. This use of independent, mutually reinforcing research methods contributes to the robustness of the findings.

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  • Richard G. Barker, 1999. "Survey and Market‐based Evidence of Industry‐dependence in Analysts’ Preferences Between the Dividend Yield and Price‐earnings Ratio Valuation Models," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(3‐4), pages 393-418, April.
    • Handle: RePEc:bla:jbfnac:v:26:y:1999:i:3-4:p:393-418
    DOI: 10.1111/1468-5957.00261
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    Cited by:

    1. Ganapathy G Gangadharan & N. Suresh, 2022. "Interrogation of A Bubble in the Indian Market," Papers 2207.13444, arXiv.org.
    2. Isabelle Chambost, 2018. "How the finance invests the future of companies: An analysis of the liquidity devices at work [Comment la finance investit le futur des entreprises : une analyse des dispositifs de liquidité à l’œu," Post-Print hal-02093710, HAL.
    3. Marc Deloof & Wouter De Maeseneire & Koen Inghelbrecht, 2009. "How Do Investment Banks Value Initial Public Offerings (IPOs)?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(1‐2), pages 130-160, January.
    4. Alpa Dhanani, 2005. "Corporate Dividend Policy: The Views of British Financial Managers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(7‐8), pages 1625-1672, September.
    5. Machado, André & Lima, Fabiano Guasti, 2021. "Sell-side analyst reports and decision-maker reactions: Role of heuristics," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).

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