MARKET VALUES, EARNINGS YIELDS AND STOCK RETURNS - EVIDENCE FROM SINGAPORE

Results of U.S. studies about the relation between stock returns and the effects of firm size and earnings to price ratio (E/P) are not consistent. Basu (1983) argues that E/P dominates size, while others conclude that size dominates E/P. This paper attempts to provide evidence on these two effects with a sample of data, 1975-1985 from the Stock Exchange of Singapore. We find that stock returns are significantly related to both size and E/P. But, the size effect appears to be of secondary importance when compared with E/P effect. © 1990.