Performance of Low Price-Earnings Companies
Date
2011-03-28
Authors
Sin, Johnny Chong Chap
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Practitioners on the stock exchange have claimed that low price earnings (P/E) ratio stocks
are generally bargains and do better than the stocks with high P/E ratios. This effect is
usually known as the P/E ratio anomaly.
The purpose of this study has been to test empirically whether the investment performance
of listed companies on the Stock Exchange of Mauritius (SEM) is related to the P/E ratios.
An analysis of such a study can help fund managers and academics to contribute to the
discussion of the existence of the P/E ratio anomaly in Mauritius and the market form
efficiency in the SEM.
Results from a portfolio study showed that, between January 2001 and December 2003,
below median P/E ratio portfolios earned, on average, higher absolute and risk-adjusted
rates of return rather than above median P/E ratio portfolios. These results showed that
investing on low P/E companies on the SEM was rewarding and could be used by
investment professionals.
Description
MBA - WBS
Keywords
Stock exchange, Mauritius