Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange)
Price to Earnings Ratio (PE Ratio) has been broadly used by analysts and investors for stock selection. Stocks with low PE ratio are perceived as having cheaper current price hence expected to generate higher return in subsequent period. This paper aims to examine predictability of stock return usin...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Petra Christian University
2012-01-01
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| Series: | Jurnal Manajemen dan Wirausaha |
| Subjects: | |
| Online Access: | http://puslit2.petra.ac.id/ejournal/index.php/man/article/view/18368 |
| _version_ | 1818013616563027968 |
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| author | Liem Pei Fun Sautma Ronni Basana |
| author_facet | Liem Pei Fun Sautma Ronni Basana |
| author_sort | Liem Pei Fun |
| collection | DOAJ |
| description | Price to Earnings Ratio (PE Ratio) has been broadly used by analysts and investors for stock selection. Stocks with low PE ratio are perceived as having cheaper current price hence expected to generate higher return in subsequent period. This paper aims to examine predictability of stock return using PE Ratio based on historical relationship between PE Ratio and subsequent stock return. Particularly, it seeks to find whether stocks with high PE Ratio followed by low stocks return and on the contrary, stocks with low PE Ratio followed by high stocks return. Using stocks which are included as member of Liquidity 45 and observation period 2005-2010 as samples, results show that there is significance difference between low PE and high PE portfolio stock return in short term (holding period of 6 months) but there is no significance difference between both portfolio stock return 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 which suggests that (trailing) PE Ratio is not useful in estimating both short term and long term stock returns |
| first_indexed | 2024-04-14T06:35:30Z |
| format | Article |
| id | doaj.art-7fe7822ae04340a7a36dfb3d52ffc794 |
| institution | Directory Open Access Journal |
| issn | 1411-1438 |
| language | English |
| last_indexed | 2024-04-14T06:35:30Z |
| publishDate | 2012-01-01 |
| publisher | Petra Christian University |
| record_format | Article |
| series | Jurnal Manajemen dan Wirausaha |
| spelling | doaj.art-7fe7822ae04340a7a36dfb3d52ffc7942022-12-22T02:07:29ZengPetra Christian UniversityJurnal Manajemen dan Wirausaha1411-14382012-01-01141712Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange)Liem Pei FunSautma Ronni BasanaPrice to Earnings Ratio (PE Ratio) has been broadly used by analysts and investors for stock selection. Stocks with low PE ratio are perceived as having cheaper current price hence expected to generate higher return in subsequent period. This paper aims to examine predictability of stock return using PE Ratio based on historical relationship between PE Ratio and subsequent stock return. Particularly, it seeks to find whether stocks with high PE Ratio followed by low stocks return and on the contrary, stocks with low PE Ratio followed by high stocks return. Using stocks which are included as member of Liquidity 45 and observation period 2005-2010 as samples, results show that there is significance difference between low PE and high PE portfolio stock return in short term (holding period of 6 months) but there is no significance difference between both portfolio stock return 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 which suggests that (trailing) PE Ratio is not useful in estimating both short term and long term stock returnshttp://puslit2.petra.ac.id/ejournal/index.php/man/article/view/18368price to earnings ratiostock selectionstocks return |
| spellingShingle | Liem Pei Fun Sautma Ronni Basana Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange) Jurnal Manajemen dan Wirausaha price to earnings ratio stock selection stocks return |
| title | Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange) |
| title_full | Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange) |
| title_fullStr | Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange) |
| title_full_unstemmed | Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange) |
| title_short | Price Earnings Ratio and Stock Return Analysis (Evidence from Liquidity 45 Stocks Listed in Indonesia Stock Exchange) |
| title_sort | price earnings ratio and stock return analysis evidence from liquidity 45 stocks listed in indonesia stock exchange |
| topic | price to earnings ratio stock selection stocks return |
| url | http://puslit2.petra.ac.id/ejournal/index.php/man/article/view/18368 |
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