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Price‐Earnings Ratios in Japan: Recent Evidence and Further Results
Author(s) -
Kumar Shashi,
Hyodo Kumi
Publication year - 2001
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/1467-646x.00065
Subject(s) - earnings , economics , inflation (cosmology) , price–earnings ratio , earnings growth , earnings response coefficient , monetary economics , relative price , econometrics , financial economics , earnings per share , accounting , physics , theoretical physics
We analyse the disparity between Japanese and US price‐earnings ratios between 1975 and 1995 with a view to find if the accounting differences between two countries can explain this disparity. Our results indicate that the accounting differences can explain a significant part but not all differences between Japanese and US price‐earnings ratios. We further investigate the effect of other possible economic factors on the behaviour of Japanese price‐earnings ratios and find that changing expectations about growth opportunities, changes in the real returns and differing inflation also do not fully explain the behaviour of the price‐earnings ratios. Therefore, the possibility of the existence of the speculative bubble needs to be explored to fully explain the behaviour of Japanese share price‐earnings ratios during this period.