Investor sentiment and the price-earnings ratio in the G7 stock markets

Title: Investor sentiment and the price-earnings ratio in the G7 stock markets
Creator: Rahman, Md Lutfur; Shamsuddin, Abul
Relation: Pacific-Basin Finance Journal Vol. 55, p. 46-62
Publisher Link: http://dx.doi.org/10.1016/j.pacfin.2019.03.003
Publisher: Elsevier
Resource Type: journal article
Date: 2019
Description: Investment practitioners often interpret an excessively high price-earnings ratio as a reflection of an overvalued market fuelled by optimistic investor sentiment. We examine the role of investor sentiment in explaining the P/E ratio in the G7 countries. The results suggest that after controlling for the effects of fundamental factors, the P/E ratio generally increases with an improvement in investor sentiment. The robustness of the findings to the use of forward P/E ratios, alternative data frequency, and controlling for financial crises is checked. Furthermore, the results from quantile regressions reveal that the effects of investor sentiment vary across the P/E quantiles.
Subject: price-earnings ratio; consumer confidence; business confidence; G7 stock markets; SDG 10; Sustainable Development Goals
Identifier: http://hdl.handle.net/1959.13/1467302
Identifier: uon:47801
Identifier: ISSN:0927-538X
Language: eng
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