IDEAS home Printed from https://ideas.repec.org/a/taf/rsarxx/v13y1999i1p1-23.html
   My bibliography  Save this article

Price earnings ratios on the Johannesburg Stock Exchange - Are they a guide to value?

Author

Listed:
  • G D I Barr
  • B S Kantor

Abstract

This paper tests whether there is an equilibrium relationship between prices and earnings on the Johannesburg Stock Exchange (JSE). Such a relationship would hold if the JSE Index and index earnings were cointegrated, A full explanation of the technique of cointegration is provided. It is shown that prices and earnings on the JSE are not cointegrated, which is aconsistent with similar results obtained for the New York Stock Exchange. The paper then offers a more general explanation of prices on the JSE to include, in addition to earnings, the influence of world markets and political and exchange rate risk, on the value of the JSE as represented by its Industrial and Financial Index. It is found that the variables of these models of the JSE are in fact cointegated. This means that there have been forces driving long term equilibrium values on the JSE. Movements away from such equilibrium values have represented market beating opportunities Current prices are thus not the best estimate of future prices, suggesting that the JSE cannot be regarded as an efficient market.

Suggested Citation

  • G D I Barr & B S Kantor, 1999. "Price earnings ratios on the Johannesburg Stock Exchange - Are they a guide to value?," South African Journal of Accounting Research, Taylor & Francis Journals, vol. 13(1), pages 1-23, January.
    • Handle: RePEc:taf:rsarxx:v:13:y:1999:i:1:p:1-23
    DOI: 10.1080/10291954.1999.11435082
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/10291954.1999.11435082
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10291954.1999.11435082?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:rsarxx:v:13:y:1999:i:1:p:1-23. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rsar .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.