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Author: | Cheng, C. Hsu, H. Noland, T. |
Title: | The volatility of the P/E ration and its components: a contrast of Japanese and U.S. markets |
Journal: | Managerial Finance
1995 : VOL. 21:9, p. 25-36 |
Index terms: | FINANCE JAPAN USA |
Language: | eng |
Abstract: | This paper extends previous research by reexamining the difference in cross-sectional variability of Japanese and U.S. price-to-earnings (PE) rations. A simple model is developed to decompose the variance of the PE ratio into three components: the variance of the price-to-book (PB) ration, the variance of the book-to-earnings (BE) ration and the covariance of the PB and BE ratios. The authors analyse the behavior of the cross-sectional variability of the PE ration and its components and compare the behavior of these ratios. |
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