TY - JOUR T1 - Do Price-Earnings Ratios Drive Stock Values? JF - The Journal of Portfolio Management SP - 86 LP - 92 DO - 10.3905/jpm.2006.661379 VL - 33 IS - 1 AU - Vivek Bhargava AU - D. K. Malhotra Y1 - 2006/10/31 UR - https://pm-research.com/content/33/1/86.abstract N2 - Does a high price-earnings ratio indicate high or low earnings growth or higher or lower future stock prices? Data for the S&P 500, the MSCI World Index, the Europe Index, and the EAFE are examined using regression analysis. The results suggest that subsequent prices rise but subsequent yields decline with high P/E ratios. Adjusted for statistical issues such as autocorrelation, heteroscedasticity, unit roots, and non-stationarity, the findings suggest that P/E ratios may not have as great an impact on prices as once expected, and that they have no impact whatsoever on subsequent yields.TOPICS: Quantitative methods, equity portfolio management, security analysis and valuation ER -