Study of stock returns through P/E, PEG and PERG: evidence from Nifty-100

Dinesh Kumar Sharma, Rakesh Kumar Srivastava and Prashant Gupta

International Journal of Business and Globalisation, 2024, vol. 36, issue 1, 83-96

Abstract: In this study, the concept of value investing strategies is employed for stock screening, whereby low-PE, low-PEG, and low-PERG ratios have been used. The concepts are based on the hypotheses that the stocks screened out with the help of these ratios could generate better returns than the market returns. This study has also examined that which risk alternative, the standard deviation of returns (σ) or the beta coefficient (β), could improve the performance while adjusting with PEG. On the bases of these alternative strategies, 30 stocks have been selected out of Nifty-100 stocks to construct different portfolios and held through the investment period from 2008 to 2018. Portfolios constructed by using low-PE ratio, low-PEG ratio and low-PERG ratio as screening strategies resulted in higher returns than the market average during investment period. Holding-period returns (HPRs) for low-PERG-β strategy have outperformed the market returns as well as other alternative strategies during April 2008 to March 2018 investment period. Beta (β) appeared to be a better alternative for risk factor than the standard deviation of returns when adjusted risk factor with PEG ratio.

Keywords: P/E ratio; PEG ratio; PERG ratio; stock return; portfolio return; Nifty-100; Indian stock market; holding-period return; HPR. (search for similar items in EconPapers)
Date: 2024
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