Basu 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

Question

Quizplus · Accepted Answer

Basu found that firms with high P/E ratios have lower average returns than firms with low P/E ratios, which contradicts the belief that high P/E ratios indicate good investment opportunities.

Basu Found That Firms with High P/E Ratios ________