International Earnings to Price Ratio Convergence: Evidence from the European Union

The International Journal of Business and Finance Research, v. 9 (5) p. 37-55

20 Pages Posted: 29 Jan 2016

See all articles by Nicholas Apergis

Nicholas Apergis

University of Piraeus; University of Derby

Christis Hassapis

University of Cyprus

Christina Christou

University of Piraeus

Steve Johnson

Sam Houston State University

Date Written: 2015

Abstract

This paper investigates whether any pattern of convergence of international earnings-to-price ratios that exist for a sample of 19 European Union (EU) countries over the period 1994-2012 can be detected through the methodology of Phillips and Sul (2007). This methodology is based on a general form of a nonlinear time varying factor model and allows for cross sectional heterogeneity as well as for different transitional time paths towards equilibrium. The results show that such a convergence is not present. Next, the study aims at detecting any potential factors supporting the pattern of divergence. The empirical findings reveal that such divergence patterns mainly reflect divergence in economic factors.

Keywords: Earnings-Price Ratios; Club Convergence; Clustering Procedure; European Markets

JEL Classification: G10, C23

Suggested Citation

Apergis, Nicholas and Hassapis, Christis and Christou, Christina and Johnson, Steve, International Earnings to Price Ratio Convergence: Evidence from the European Union (2015). The International Journal of Business and Finance Research, v. 9 (5) p. 37-55. Available at SSRN: https://ssrn.com/abstract=2664728

Nicholas Apergis (Contact Author)

University of Piraeus ( email )

Karaoli and Dimitriou 80
80 KARAOLI & DIMITRIOU STREET
Piraeus, Attiki 18534
Greece

University of Derby ( email )

Kedleston Road
Derby, Derbyshire DE22 1GB
United Kingdom

Christis Hassapis

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+357-2-892116 (Phone)
+357-2-750310 (Fax)

Christina Christou

University of Piraeus ( email )

Karaoli and Dimitriou 80
80 KARAOLI & DIMITRIOU STREET
Piraeus, Attiki 18534
Greece

Steve Johnson

Sam Houston State University ( email )

1803 Ave I
Huntsville, TX 77341
United States

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