Price Earnings Ratio (PER) Model Consistency : Evidence From Jakarta Stock Exchange  

Oleh:

Suryawijaya, Marwan Asri ; Heveadi, Anton N.

Jenis: Article from Journal - ilmiah nasional - tidak terakreditasi DIKTI
Dalam koleksi: International Journal of Business vol. 1 no. 2 (Sep. 1999), page 85-98.
Topik: price earnings ratio; capital market; cross - sectional model; price earning ratio
Fulltext: Price Earnings Ratio Model Consistency Evidence From Jakarta Stock Exchange.pdf (4.04MB)

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: II51.1 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

Recently, stock valuation model using the earning multiplier approach (PER) is more popular among investors and analysis. This popularity has caused this model to seem to be the most perfect model among other valuation models. In response to the fact above, this research tries to give empirical evidence whether PER's cross - sectional model can be used in determining the fairness of stock price traded in jakarta stock exchange. Evaluation of the capability of PER's cross - sectional model in determining the common stock price was conducted by developing three regression models from different time periods, namely the years of 1995, 1996 and 1997. The regression models used in this research was the one developed by whitbeck - kisor (1973). The model employed growth, dividend payout ratio (DPR) and standard devistion of growth (t - growth) as independent variable. This research was intended to test the consistency of the model in assessing stock prices. The result of this research showed that each model developed at different time periods, though with the same sample and method, gave different results. The differences were in the significance level and in the weight of influence of independent variables to the corresponding dependent variables. As a stock valuation model, a regression model should perform consistenly from period to period, so normal PER of a stock could be predicted based on the model that was developed by historical data. The result of this research conclude that PER cross - sectional model is inconsistent in determining the common stock to buy or to sell in short - term. Nevertheless the models can be helpful in finding the variable and to set of the weight that determines the PER at a point of time. Stock valuation using earning multiplier approach is appropriate if investors have an assumption that the market taste and situation at the valuation period is the same as the period when the model is developed.

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