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1.2 Scope:
This study concerns on the relationship between stock prices to the PE ratio and 200
moving averages. The data used in this study are the companies from Kompas 100 from
the first trading at January 2005 to December 2009 .The time horizon is 5 years. The
author benchmark to the 28 companies instead of 100 companies because the rest were
go public after 2000 and some data of the companies are not available.
This study is to find out whether PE ratio and 200 moving average can be used as good
indicators to help investor in buying or selling the stocks.
1.3 Aims and Benefits
This study aims to test whether low PE Ratio can help investors making buy or sell
decisions yielding above Buy and Hold returns and to test whether the combination
between low PE ratio and above 200 DMA can give returns yielding above Buy and
Hold strategy.
1.4 Research Hypothesis
This research is conducted to test whether the investor can generate profit just based on
the PE ratio that below to the 5 years historical PE. The author decides to combine the
fundamental analyses and the technical analyses to generate a buying or selling signal.
This research is conducted to test whether the investor can generate profit that is greater
than Buy and Hold strategy, just based on the PE ratio that below to the 5 years
historical PE or 200 above Day Moving Average.
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