Parametric Determinants of Price-Earnings Ratio in Indian Capital Markets

The IUP Journal of Applied Finance, Vol. 15, No. 9, pp. 63-82, September 2009

Posted: 18 Sep 2009

See all articles by Sushil Kumar Bhadu

Sushil Kumar Bhadu

Kurukshetra University - Institute of Management Studies

D. P. Warne

Chaudhary Devi Lal University

Date Written: September 9, 2009

Abstract

The Price-Earnings (P/E) ratio is a widely used measure of the expected performance of companies, and it has almost invariably been calculated as the ratio of the current share price to the previous year’s earnings. However, the P/E of a particular stock is partly determined by outside influences, such as the year in which it is measured, the size of the company, and the sector in which the company operates. Thus, the present paper is based on the examination of various parametric determinants of P/E ratio in the Indian capital market, and it is found that the results of multiple regression model based on standardized variables indicate that ‘variability in market price’ and ‘size of the company’ were the most important determinants industry-wise as well as in aggregate analysis.

Suggested Citation

Bhadu, Sushil Kumar and Warne, D. P., Parametric Determinants of Price-Earnings Ratio in Indian Capital Markets (September 9, 2009). The IUP Journal of Applied Finance, Vol. 15, No. 9, pp. 63-82, September 2009, Available at SSRN: https://ssrn.com/abstract=1470591

Sushil Kumar Bhadu (Contact Author)

Kurukshetra University - Institute of Management Studies ( email )

Kurukshetra, Haryana 136119
India
9466334730 (Phone)

D. P. Warne

Chaudhary Devi Lal University ( email )

Sirsa, Haryana 125055
India

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