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Adriani, Fabrizio, Bagella, Michele and Becchetti, Leonardo (2005) 'Observed and "Fundamental" Price-Earning Ratios: A Comparative Analysis of High-Tech Stock Evaluation in the US and in Europe.' Journal of International Money and Finance, 24 (4). pp. 549-581.

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Abstract

By assuming that a large share of investors (which we call fundamentalists) follows a fundamental approach to stock picking, we build a discounted cash flow (DCF) model and test on a sample of high-tech stocks whether the strong and the weak version of the model are supported by data from the US and European stock markets. Empirical results show that “fundamental” earning price ratios explain a significant share of cross-sectional variation of the observed E/P ratios, with other additional variables being only partially and weakly relevant. Within this general framework, valid both for Europe and the US, empirical results outline significant differences between the two markets. The most relevant of them is that the relationship between observed and fundamental E/P ratios is much weaker in Europe.

Item Type: Journal Article
SOAS Departments & Centres: Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management
ISSN: 02615606
DOI (Digital Object Identifier): https://doi.org/10.1016/j.jimonfin.2005.03.004
Date Deposited: 30 Jun 2008 15:42
URI: https://eprints.soas.ac.uk/id/eprint/3394

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