Abstract:
As every investor in the selection of his investment project considers two important factors, return and risk
of stock and as one of the comparison indicators of stock risk of different companies is price-earnings ratio,
the current study focused on two factors of return on stock and price-earnings ratio and investigated the
relationship between these two variables. In this study, the price-earnings ratio and stock return were
analyzed by the data of this ratio and the latest daily trading price of the companies that in the calculation of
stock return is used in Farvardin of 2001 to Esfand of 2008 for 46 companies the member of sample
population. By econometric tests, the validity conditions of satisfaction of regression equation in the
mentioned companies were analyzed. The results of the regression indicate a positive and significant
relationship between stock return and price-earnings ratio; it means that this ratio is a significant variable
to explain the stock return.
