An Analysis on Shiller's P/E Ratio and Stock Reward- the Case Study of Taiwan Stock Market

• Main Authors: Ya-Ling Hsiao, 蕭雅玲
• Other Authors: Ai-Chi Hsu
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/jpvt2d

碩士 === 國立雲林科技大學 === 財務金融系 === 102 === Price-earning ratio is not only been widely applied by external financial information users to evaluate security values for investment targets but also an important indicator to detect the market efficiency for academic studies. Robert J. Shiller brought up the Cyclically Adjusted Price Earing Ratio, called CAPE ratio or P/E 10 in order to improve the meansure problems. Originally P/E ratio is calculated by the historically accounting data for the Earning Per Share. Thus, financial information users can get the real situation without the interference of the business cycle. Under the framework of the rational expectation behind the efficient market hypothesis, the empirical evidence found most financial mature markets confirming the lower P/E ratio, the worse present market value. But the equity valuation is expected to be better in the future. Under 10% significance level, the result of the analysis on the stock reward and Shiller’s P/E ratio of the TAIEX adjusted by CPI from Jan. 1999 to April 2014 is as the following: i. Both of the covariance and correlation between TAITX monthly stock reward and Shiller’s P/E ratio are positive. While the stock reward upward or to the recently high, the ratio goes up as well. ii. The result is the same as what the public expected. The multiplicative inverse of P/E ratio is the expected future stock return. This also comfirms the so-call market timing, to sell at high P/E ratio and to buy at low. iii. The correlation coefficient of TAITX monthly stock reward and Shiller’s P/E ratio is approx. 0.12, which is far below 1. It means the Shiller’s P/E ratio is not the major factor to TAITX monthly stock reward. It is not suggested the information users simply make their decisions only from it. iv. The covariance and correlation coefficient of Shiller’s P/E with the TAIEX retward is higher than those of traditional P/E. v. From different period time average of Shiller’s P/E ratio, the monthly one is most connectted with the stock reward amoungothers. The standard deviation of the monthly Shiller’s P/E ratio is aslo the highest amoung them. The lowest one is the yearly Shiller’s P/E ratio.