The Earnings Yield Anomaly Revisited
April 21, 2011 - Fundamental Valuation
Does the earnings yield (inverse of price-to-earnings ratio, or E/P) usefully predict returns for individual stocks? In their April 2011 paper entitled “Reexamination of the Earnings-Price Anomaly by the Buy-Sell Strategy”, Hsin-Yi Yu and Li-Wen Chen test a long-only strategy that forms monthly value-weighted portfolios based on time-series sorting rather than cross-sectional sorting. Time-series sorting… Keep Reading