The effectiveness of low P/E strategy in Singapore

• Main Authors: Butt, Yiu Yi, Lai, Choi Wai, Seah, Miew Siang
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2014
• Subjects: DRNTU::Business
• Online Access: http://hdl.handle.net/10356/58597
• Institution: Nanyang Technological University

Many studies have investigated and concluded that firms of low PIE ratios yield abnormally high risk adjusted returns. Such a phenomenon has been labeled as the low PIE effect. This project aims to verify the low PIE effect and the optimal investment horizon of the low PIE strategy in the Singapore market and the four sectors on the SES mainboard, namely, Industrial and Commercial, Finance, Hotels and Properties. It has been found that: 1. The low PIE effect in the market is inversely proportional to the holding period of the portfolio; 2. The low PIE effect exists, in the Industrial and Commercial Sector, but only for short holding periods. Neither low nor high PIE effect is evident in holding periods of 3 months or more; 3. Weak low PIE effect prevail in the Finance Sector, irrespective of holding period; 4. Consistent low P/E effect dominate in the Hotels Sector throughout all holding periods; 5. A slight low PIE effect is evident in the Properties Sector. It is maximized in holding period of about 3 months. Interviews with a dealer, a fund manager and two investment analysts are conducted to find out the practical application of the strategy.