Explaining the high P/E ratios: The message from the Gordon model

Zimmermann, Heinz. (2018) Explaining the high P/E ratios: The message from the Gordon model. Journal of Investment Management, 16 (4). pp. 64-78.

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Are the high valuation levels of equity prices, after controlling for the low interest rate level, driven by irrational exuberance and excessive growth expectations? The Gordon model helps for a consistent interpretation of commonly used valuation ratios. Overall, P/E ratios do not seem to be caused by irrational growth expectations, rather a decline can be observed over the past years. Discount rates are the major drivers of high valuation levels in Europe and particularly in Switzerland, while profitability is the major source in the US and Germany.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Finanzmarkttheorie (Zimmermann)
UniBasel Contributors:Zimmermann, Heinz
Item Type:Article, refereed
Article Subtype:Research Article
Note:Publication type according to Uni Basel Research Database: Journal article
Last Modified:27 Dec 2018 10:27
Deposited On:27 Dec 2018 10:27

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