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the claim
The price-to-earnings ratio is a predictor of future stock returns.
the verdict
SUPPORTED
the evidence backs this
Recorded sources
12 sources for · 0 against
Is it true that the price-to-earnings ratio is a predictor of future stock returns?
Yes. Multiple financial reference works and academic studies support the use of the price-to-earnings ratio (and its cyclically adjusted variants) as a predictor or indicator of future stock returns.
Verdict: SUPPORTED · 12 sources for, 0 against · Last checked
The analysis
Judged against statistical and reference sources.
Evidence for · 12
Reference article covering this claim directly
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Wikipedia: Cyclically adjusted price-to-earnings ratio. (n.d.). Wikipedia. https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio
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More for · 11
Book title indicates price-earnings ratio is discussed as a predictor of future stock returns.
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1954-, S. H. N. & Inc, B. (2000). MIT Press: Investment intelligence from insider trading [electronic resource]. MIT Press. https://archive.org/details/investmentintell00hnej
Book title indicates price-earnings ratio is discussed in relation to future stock returns.
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Seyhun, H. N. (2000). MIT Press: Investment intelligence from insider trading. MIT Press. https://archive.org/details/investmentintell00seyh_0
States low price-to-earnings ratio stocks outperform high P/E stocks (value effect).
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B, C. L. (2006). McGraw-Hill: Quantitative equity portfolio management : an active approach to portfolio construction and management. McGraw-Hill. https://archive.org/details/quantitativeequi0000chin
Compares price/earnings and price/sales ratios as predictors of stock gains.
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1972-, H. J. (2008). John Wiley & Sons: Your next great stock : how to screen the market for tomorrow's top performers. John Wiley & Sons. https://archive.org/details/yournextgreatsto0000houg
Mentions price-to-earnings ratio alongside valuation factors and subsequent returns.
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Siegel, J. J. (1995). Irwin: Stocks for the long run. Irwin. https://archive.org/details/stocksforlongrun00sieg_0
Uses P/E ratio as a variable in a regime shift and return prediction model for the Tehran Stock Exchange.
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Assadi, G., Fadaeinejad, M., & Faroughi, H. (2022). تحقیقات مالی: An Explanation Model of Regime Shifts in the Tehran Stock Exchange by Smooth Transfer Regression. تحقیقات مالی. https://doi.org/10.22059/frj.2021.324056.1007187
Notes price-earnings ratio predicts the shape of the future term structure / macro variables.
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OpenAIRE: Does the Stock Market Predict Macro-Variables?. (2018). OpenAIRE. https://doi.org/10.2139/ssrn.3269862
Uses price/earnings ratio as a key financial indicator in deep learning stock price prediction models.
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OpenAIRE: Stock Price Predictor: Implementing Stocks Predictive Model Using Deep Learning. (2024). OpenAIRE. https://doi.org/10.25147/ijcsr.2017.001.1.209
Assesses efficacy of P/E measures as a predictor of future stock returns using portfolio methodology.
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OpenAIRE: A growth adjusted price-earnings ratio. (2020). OpenAIRE. https://doi.org/10.48550/arxiv.2001.08240
Investigates whether P/E valuation ratios drive stock values and returns across GCC countries.
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OpenAIRE: Do Valuation (P/E, ROE and P/BV) Ratios Drive Stock Values? A Case of GCC Countries. (2019). OpenAIRE. https://doi.org/10.5296/ijafr.v9i2.14848
Examines financial ratios like earnings yield for stock return predictability in Malaysia.
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OpenAIRE: Stock Returns Predictability Using Financial Ratios in Malaysia. (2023). OpenAIRE. https://doi.org/10.55057/ajafin.2023.5.3.3
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What does the evidence say?
Judged against statistical and reference sources.
Receipt History
first checked06 Aug 2026
judged → SUPPORTED · 7506 Aug 2026
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