Thanh Nguyễn - Profile on Academia.edu (original) (raw)
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RMIT International University Vietnam
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Papers by Thanh Nguyễn
A large body of empirical literature suggests that stock prices are roughly proportional to earni... more A large body of empirical literature suggests that stock prices are roughly proportional to earnings in the long-term. However, econometric tests on a range of different model specifications have not been able to verify this expected contribution of earnings to stock prices, a result that has become known as the price-earnings (PE) puzzle. A number of econometric issues arise from previous studies that model the PE relation assuming a constant ratio and a linear model. The contribution of this paper is to model the PE relation as a log-linear function, the PE ratio as a variable, and in doing so to show how the PE puzzle may thereby be resolved.
A large body of empirical literature suggests that stock prices are roughly proportional to earni... more A large body of empirical literature suggests that stock prices are roughly proportional to earnings in the long-term. However, econometric tests on a range of different model specifications have not been able to verify this expected contribution of earnings to stock prices, a result that has become known as the price-earnings (PE) puzzle. A number of econometric issues arise from previous studies that model the PE relation assuming a constant ratio and a linear model. The contribution of this paper is to model the PE relation as a log-linear function, the PE ratio as a variable, and in doing so to show how the PE puzzle may thereby be resolved.