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U.S. stock market P/E ratios, structural breaks, and long-term stock returns

The Journal of Business Economics and Management

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Field Value
 
Title U.S. stock market P/E ratios, structural breaks, and long-term stock returns
 
Creator Baek, Chung
Lee, Ingyu
 
Description Our study investigates structural changes in the market P/E ratio and shows how structural changes affect long-term stock market returns. Using the cumulative sum control chart and the Bai-Perron algorithm, we identify multiple structural breakpoints in the market P/E ratio and find that those structural changes are significantly perceived over the long run. Unlike previous studies that do not consider structural changes, our study is the first one that shows how structural changes asymmetrically influence long-term stock returns depending on the high or low P/E period. This implies that structural changes in the market P/E ratio play an important role in explaining long-term stock returns. We propose that structural changes should be taken into account in some manner to establish the relationship between P/E ratios and long-term stock returns.
 
Publisher VGTU Press Technika
 
Date 2018-05-03
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://journals.vgtu.lt/index.php/JBEM/article/view/1602
10.3846/16111699.2017.1409263
 
Source Journal of Business Economics and Management; Vol 19 No 1 (2018); 110-123
2029-4433
1611-1699
 
Language eng
 
Relation https://journals.vgtu.lt/index.php/JBEM/article/view/1602/1253
 
Rights Copyright (c) 2018 Journal of Business Economics and Management
http://creativecommons.org/licenses/by/4.0