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An Analysis of Market P/E Using Auto Regression and Vector Auto Regression Models


Affiliations
1 Jaipuria Institute of Management, Noida, India
 

Price Earnings (P/E) ratio is one of the most commonly used and one of the most useful techniques in valuation of companies which can be applied for companies as well as for market and can be used in different forms for analysis. Various macroeconomic factors affect stock market and the valuation of companies. Thus, it becomes very important to understand the behavior of P/E ratio with other relevant macro economic variables. This research is such an attempt where the market P/E is analyzed in comparison with payout ratios, money market rates, Forex rates and GDP using advanced statistical analysis such as Auto Regression and Vector Auto Regression Modeling. It was found that dividend payout and money market rates were the two important variables affecting market P/E.

Keywords

Auto Regression, Corporate Valuation, Econometrics, Financial Economics, Macroeconomics, P/E Ratio.
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Abstract Views: 358

PDF Views: 124




  • An Analysis of Market P/E Using Auto Regression and Vector Auto Regression Models

Abstract Views: 358  |  PDF Views: 124

Authors

Moid U. Ahmad
Jaipuria Institute of Management, Noida, India

Abstract


Price Earnings (P/E) ratio is one of the most commonly used and one of the most useful techniques in valuation of companies which can be applied for companies as well as for market and can be used in different forms for analysis. Various macroeconomic factors affect stock market and the valuation of companies. Thus, it becomes very important to understand the behavior of P/E ratio with other relevant macro economic variables. This research is such an attempt where the market P/E is analyzed in comparison with payout ratios, money market rates, Forex rates and GDP using advanced statistical analysis such as Auto Regression and Vector Auto Regression Modeling. It was found that dividend payout and money market rates were the two important variables affecting market P/E.

Keywords


Auto Regression, Corporate Valuation, Econometrics, Financial Economics, Macroeconomics, P/E Ratio.

References