Basu (1977, 1983) Found That Firms with High P/E Ratios

question 53

Multiple Choice

Basu (1977, 1983) found that firms with high P/E ratios

• A) earned higher average returns than firms with low P/E ratios.
• B) earned the same average returns as firms with low P/E ratios.
• C) earned lower average returns than firms with low P/E ratios.
• D) had higher dividend yields than firms with low P/E ratios.

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Definitions:

Cholesterol

A type of fat found in the blood that is necessary for building cells and producing certain hormones, but high levels can increase the risk of heart disease.

Rightward Shift

In economics, a graphical representation indicating an increase in supply or demand in a market, moving the curve to the right.

Tax Reduction

The act of decreasing the rates or amounts of taxes imposed by a government, often with the aim of stimulating economic growth or providing relief to taxpayers.

Income of Consumers

The total earnings received by individuals and households from various sources including wages, salaries, benefits, and investment income.