Price earnings ratio and share performance at Nairobi stock exchange
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Date
2003-10Author
Muthui, Solomon M
Type
ThesisLanguage
enMetadata
Show full item recordAbstract
The study set out to investigate whether there is any significant difference in returns
between Low P/E Ratio stocks and High P/E Ratio stocks for companies quoted at the
Nairobi stock exchange.
The need for the study emanated from the apparent conflict between the contrarian
community and the value line where the former argues that the Low P/E stocks
consistently produce returns greater than the average stocks and the later quite the
contrary, that the higher the P/E Ratio the better, hence the need for an empirical
study to get the real picture from our local stocks exchange perspective. (NSE)
The P/E Ratios of the companies were computed and the stocks divided into three
groups, the High, medium and Low. Share returns and risk were computed using
secondary data obtained from the companies financial statements available at the
Nairobi stock exchange for the high and low groups only. We then used the one way
ANOVA to test our hypothesis.
The findings were that there is no statistically significant difference in returns of
shares with Low P/E Ratio and the High P/E Ratio. This led to the conclusion that
these investment strategies do not apply in this market and hence the investors should
use other investment strategies in choosing assets to include in their portfolio.
Citation
Masters in Business Administration, University of Nairobi (2003)Publisher
University of Nairobi Faculty of Commerce