The Relationship between Stock Price and EPS: Evidence Based on Taiwan Panel Data

Hsu-Ling Chang (), Yahn-Shir Chen (), Chi-Wei Su () and Ya-Wen Chang ()
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Hsu-Ling Chang: Department of Accounting and Information, Lin Tung University, Taichung, Taiwan
Yahn-Shir Chen: Department of Accounting, National Yunlin University of Science and Technology, Yunlin, Taiwan
Chi-Wei Su: Department of Finance, Providence University,Taichung, Taiwan
Ya-Wen Chang: Department of Finance, Providence University,Taichung, Taiwan

Economics Bulletin, 2008, vol. 3, issue 30, pages 1-12

Abstract: In this study, we use panel cointegration methods to investigate the relationship between stock prices and earnings-per-share (EPS). Furthermore, we consider whether stock prices respond to EPS under the different level of growth rate of operating revenue. The empirical result indicated that the cointegration relationship existed between stock prices and EPS in the long-run. Furthermore, we found that for the firm with a high level of growth rate, EPS has less power in explaining the stock prices; however, for the firm with a low level of growth rate, EPS has a strong impact in stock prices.

Keywords: Panel Cointegration; Earnings Response Coefficient (ERC) (search for similar items in EconPapers)
JEL-codes: C3 G1 (search for similar items in EconPapers)
Date: 2008-05-24

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