Price-earning ratio effect
and firm size effect have been discovered by Banz and Basu in 1981 and 1977
respectively. Consequently, both of these effects have been widely studied by
financial analysis in markets all over the world including KLSE. The study
conducted by Ong Yew Jin (1990) had confirmed the existence of a week
price-earning ratio effect in KLSE. At the same time, he also found the
significant existence of firm size effect in local stock exchange. This study has been conducted with the
purpose of extending Ong Yew Jin’s study to generally reconfirm the existence
of price-earning ratio effect and firm size returns. In conducting this study,
the methods of portfolio formation has been employed and such indexes as Jensen
Index, sharpe Index and Trynor Index have bee utilized to evaluate the
performance of the portfolios. The results of this study, covering the period
of 1990 to 1999, have conducted the existence of price-earning ratio effect and
firm size effect in our local stock exchange.
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B. A. (Hons) In Accounting
Number: 3