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Price – Earnings Ratio for the Lima Stock Exchange: Issues and Applications

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  • Pereda, Javier

    (Banco Centro de Reserva del Perú)

Abstract

In this paper we construct a methodology to calculate the price-earnings ratio (PER) of the General Index of the Lima StockExchange (IGBVL) for the period 1995-2011 following Shiller (2005). Results show that equity prices, in the analyzedperiod, basically responded to the expected evolution of earnings of the companies, even during the period of the equity prices boom that preceded the financial crisis of 2008. This conclusion is reinforced when we calculate, following Hayford y Malliaris (2004), the implicit equity premia expected for stock investors. We find high values of equity premia during the period of stock prices boom, which would justify the high PER values registered in that period.

Suggested Citation

  • Pereda, Javier, 2012. "Price – Earnings Ratio for the Lima Stock Exchange: Issues and Applications," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 17(32), pages 41-52.
    • Handle: RePEc:ris:joefas:0041
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    References listed on IDEAS

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    1. Jacopo Carmassi & Daniel Gros & Stefano Micossi, 2009. "The Global Financial Crisis: Causes and Cures," Journal of Common Market Studies, Wiley Blackwell, vol. 47(5), pages 977-996, November.
    2. Robert J. Shiller, 1999. "Measuring Bubble Expectations and Investor Confidence," NBER Working Papers 7008, National Bureau of Economic Research, Inc.
    3. Marc D. Hayford & A. G. Malliaris, 2005. "Monetary Policy And The U.S. Stock Market," World Scientific Book Chapters, in: Economic Uncertainty, Instabilities And Asset Bubbles Selected Essays, chapter 15, pages 233-247, World Scientific Publishing Co. Pte. Ltd..
    4. repec:bla:jcmkts:v:47:y:2009:i::p:977-996 is not listed on IDEAS
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