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Please use this identifier to cite or link to this item: http://hdl.handle.net/2108/303

Title: Observed and fundamental price earning ratios: a comparative analysis of high-tech stock evaluation in the US and in Europe
Authors: Bagella, Michele
Becchetti, Leonardo
Adriani, Fabrizio
Keywords: financial market microstructure
asset pricing
Issue Date: Sep-2003
Publisher: CEIS
Series/Report no.: CEIS Tor Vergata Research Paper; 34
Abstract: By assuming that a large share of investors (which we call fundamentalists) follows a fundamental approach to stock picking, we build a discounted cash flow (DCF) model and test on a sample of high-tech stocks whether the strong and the weak version of the model are supported by data from the US and European stock markets. Empirical results show that "fundamental" earning price ratios explain a significant share of cross sectional variation of the observed E/P ratios, with other additional variables being only partially and weakly relevant. Within this general framework, valid both for Europe and the US, empirical results outline significant differences between the two markets. The most relevant of them is that the relationship between observed and fundamental E/P ratios is much weaker in Europe.
URI: http://hdl.handle.net/2108/303
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