P/E Ratio Effect on the Stock Returns in the Banking Industry – An Empirical Study in National Stock Exchange, India
Year: 2015
Type: article
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.
Authors: Radhakrishna Mishra, Dr. Rashmita Sahoo
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4383300967