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Article University of Akureyri > Viðskipta- og raunvísindasvið > Working Paper Series >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1946/1097

  • Title is in Icelandic A Test of Market Efficiency: Evidence from the Icelandic Stock Market
  • Abstract is in Icelandic

    This extensive study examines the relationship between the price-to-earnings (P/E)
    ratio, the market-to-book (M/B) ratio, dividend yields, size, past returns, and current
    returns of Icelandic stocks. The study uses monthly return data on stocks from the
    Iceland Stock Exchange from January 1993 to June 2003. The model, which uses
    multiple regression analysis with dummy variables, is based on the classical Capital
    Asset Pricing Model, so the beta coefficient is the sole measure of risk. The findings
    are that the returns of stocks with a low P/E ratio are much higher than returns of
    other stocks, and that these returns are statistically significantly higher when
    differences in systematic risk are accounted for. The returns of small stocks and stocks
    with a low M/B ratio are higher than that of other stocks but the difference is not
    statistically significant. However, there is no relationship between current returns and
    historical returns, or between returns and dividend yields.
    JEL classification: G12
    Keywords: Market efficiency, Icelandic stock market, P/E ratio

  • Aug 1, 2005
  • http://hdl.handle.net/1946/1097

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