Stock Prices and Price/Earning Ratio Relationship: A Sectoral Analysis with Panel Data

In this study, we investigate with two different models that whether a meaningful relationship between price/earnings ratio and stock prices or not in the sectoral basis for the 2000-2008 period. We use one-way fixed effects models and test for low price/earnings ratio effect. According to the results, there is not relationship price/earnings ratio all sectors in ISE. Six months in certain sectors, certain sectors for the three-month period may be talking about such a relationship. Therefore, when we investing for relevance sector should be decided according to the model is valid. The estimated parameters show that there is low price/earnings ratio relationship is valid for all sectors, except the metal goods industry in a three-month period.