ISSN 2394-5125
 

Research Article 


DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?

Dr. Pooja P. Patel, Dr. Vaishali Dhingra.

Abstract
The present paper is a novel attempt to analyze the impact of P/E, P/B and Dividend yield on Nifty returns. The existing study is an endeavor to understand the future earnings and prices of Nifty 50, as one of the prime stock indices of Indian Capital markets. A time series data analysis has been performed to measure the impact of P/E, P/B and Dividend yield on Nifty returns. The data set comprises a total of 246 observations in the form of daily data from January 1, 2018, to December 31, 2018. An ordinary least squares method of multiple regressions has been performed along with the test of stationarity. The modelís adequacy was tested by adopting a serial correlation LM test and ARCH test of heteroskedasticiy on residuals. Lastly, Vector auto regression (VAR) has been applied to capture the linear interdependencies among multiple time series of P/E, P/B, Dividend Yield and Nifty. All the four series are found to be stationary at first order of differencing. Dividend Yield shares a negative correlation with the remaining three variables. However, the regression model is profound enough with significant coefficients and residual fitness. But the one period lag of P/E is significant in explaining P/B and Nifty as indicated by the results of Vector auto regression (VAR). The paper suggests to the market participants that P/E ratio is the most suitable variable having a significant impact in determining the share prices. Dividend yield, however, poses a negative impact on share prices but this can be further tested with long term. Companies can also keep a track on their respective ratios as it can help them to devise certain polices to increase the wealth of shareholders.

Key words: P/E, P/B, Dividend yield, Nifty, Vector auto regression, Econometrics


 
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How to Cite this Article
Pubmed Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra. DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?. JCR. 2020; 6(5): 338-346. doi:10.31838/jcr.06.05.59


Web Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra. DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?. http://www.jcreview.com/?mno=12963 [Access: June 01, 2021]. doi:10.31838/jcr.06.05.59


AMA (American Medical Association) Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra. DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?. JCR. 2020; 6(5): 338-346. doi:10.31838/jcr.06.05.59



Vancouver/ICMJE Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra. DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?. JCR. (2020), [cited June 01, 2021]; 6(5): 338-346. doi:10.31838/jcr.06.05.59



Harvard Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra (2020) DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?. JCR, 6 (5), 338-346. doi:10.31838/jcr.06.05.59



Turabian Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra. 2020. DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?. Journal of Critical Reviews, 6 (5), 338-346. doi:10.31838/jcr.06.05.59



Chicago Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra. "DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?." Journal of Critical Reviews 6 (2020), 338-346. doi:10.31838/jcr.06.05.59



MLA (The Modern Language Association) Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra. "DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?." Journal of Critical Reviews 6.5 (2020), 338-346. Print. doi:10.31838/jcr.06.05.59



APA (American Psychological Association) Style

Dr. Pooja P. Patel, Dr. Vaishali Dhingra (2020) DOES THE TRIAD OF P/E, P/B AND DIVIDEND YIELD DETERMINE STOCK PRICE PERFORMANCE?. Journal of Critical Reviews, 6 (5), 338-346. doi:10.31838/jcr.06.05.59