ISSN NO: 0974-4274(PRINT), ISSN NO: 2582-1148(ONLINE)

094390-15757 journal@srustiacademy.ac.in

Srusti Management Review (SMR)

Enlisted in UGC CARE Group - 1 | Journal of Management & IT

  • Enlisted in UGC CARE Group - 1

  • Listed in Ulrich's Periodicals Directory

  • Indexed in J-Gate

  • Licensor for EBSCO

  • Listed in Proquest

  • Included in Google Scholar

  • Accessed in DOAJ

P/E Ratio Effect on the Stock Returns in the Banking Industry – An Empirical Study in National Stock Exchange, India

Year 2015
Volume/Issue/Review Month Vol. - VIII | Issue II | July - December
Title P/E Ratio Effect on the Stock Returns in the Banking Industry – An Empirical Study in National Stock Exchange, India
Authors Radhakrishna Mishra , Dr. Rashmita Sahoo
Broad area P/E Ratio Effect on the Stock Returns in the Banking Industry – An Empirical Study in National Stock Exchange, India
Abstract
Economists around the world have always tried to find out the presence of anomalies in the stock market. With a
view to earn a quick buck in the market, investors always search for alternatives. An investment strategy based on
purchasing low price-earning stocks is said to help in beating the index. This so called price-earning effect is such
an anomaly. The purpose of this study is to verify the impact of price-earning ratio on the stock returns in the
banking industry. This paper tries to find out answer to the question “Whether one can make abnormal returns by
taking advantage of price-earning ratio effect in the banking industry? The stock returns are calculated and compared
by using certain statistical tools. The stocks are divided into three categories based on price-earning ratio (i.e. Low
= 0 to 10, Mid = 10 to 20 and High = More than 20). After this all the three portfolios are compared by using ANOVA
and Correlation analysis to study the presences of the P/E ratio effect in the banking industry in Indian stock
market (i.e. National Stock Exchange). However, the result of the study reveals the absence of P/E ratio effect on
the stock returns in the banking industry
Description During the last decade, the Indian stock market has shown metamorphic changes. This has motivated academicians and practitioners to find out ways to get more return from the market. Certain studies have shown the presence of anomalies in the stock market
File
Referenceses
1. Aswath, Damodaran. Investment Valuation. New
York: Wiley Finance, 2002, pp. 69
2. Basu, S. (1977). “Investment Performance of
Common Stocks in Relation to The Price-
Earnings Ratios: A Test of the Efficient Market
Hypothesis”, The Journal of Finance, 32(3), pp.
663-682.
3. Banz R.W, and Breen, “Sample-Dependent
Results Using Accounting and Market Data:
Some Evidence.” Journal of Finance. (1986), pp
779-93.
4. Fisher Black, “Capital Market Equilibrium with
Restricted Borrowing”. Journal of Business (July
1972), pp. 444-455.
5. Fischer Black, Michael C. Jensen and Myron
Scholes, “The Capital Asset Pricing Model:
Some Empirical Tests”, in Studies in the Theory
of Capital Markets, Michael C. Jensen, ed. (New
York: Paareger, 1972), pp. 79-121.
6. Kennon, Joshua. “Price to Earnings Ratio (P/E
Ratio).” About.com n. pag. Web. 16 Dec 2015.
<http://beginnersinvest.about.com/cs/
glossary1/g/defperatio.htm>.
7. Ray Ball and Phillip Brow, “An Empirical
Evaluation of Accounting Income Numners”,
Journal of Accounting Research (Autumn 1968),
pp. 159-178.
8. Reinganum, Marc R., (1981), “Misspecification
of capital asset pricing: Empirical anomalies
based on earnings’ yields and market values”,
Journal of Financial Economics- 9, March, 1981
pp. 19-46