Re - Examining The Existence of Low Price - Earnings Ratio Effects : A Descriptive Approach to The Case of Indonesian Stock Market  

Oleh:

Suryawijaya, Marwan Asri

Jenis: Article from Journal - ilmiah nasional - tidak terakreditasi DIKTI
Dalam koleksi: International Journal of Business vol. 4 no. 2 (May 2002), page 227-236.
Topik: stock market; low p / e effect; price - earning ratio

Ketersediaan

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

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Isi artikel

From practical point of view, price - earnings (P / E) ratios is one of numerous important aspects to consider. Analysts, investors and traders in stock markets use P / E ratio - together with other information - in analyzing the past performance, and predicting the future prospect of securities in the market. However, nothing its importance, there are some significant disagreements among researchers regarding the ability of P / E ratio in providing "correct information" about the future return of company stocks. One of the topics under discussion is about the presence of so - called low P / E effect, which hypothesizes that high P / E will be followed by low returns and low P / E will be followed by high returns. This study, by repeating partially johnson et al. (1989) procedures, was trying to confirm the low P / E effect hyothesis in indonesian market. The study involved 267 stocks listed in jakarta stock exchange in the sample frame and selected the period of 1994 - 2000 as the focus of analysis. The study also has an intention to investigate whether there was a structural change in return P / E relationship form the pre - crisis period (1994 - 1996). to the crisis period (1998 -2000). The procedure of analysis was divided into two sections, In the first section is a descriptive macro (market) analysis was presented, to test the hypothesis at the market level. It started with an overview about the fluctuation and trend of market P / E ratios during the period of 1991 - 2000 and followed by investigating the relationship between market P / E and the following returns. A regression analysis was also performed to strengthen the analysis from statistical point of view. In the second section, analysis is more directed to the portfolio level where the portfolios were ranked according to their P / E ratios. The study was concluded with a main finding this does not support the low P / E effect hypothesis.

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