Received: 27-05-2013 / Accepted: 24-04-2014
As one of the two most popular valuation models in the world, relative valuation is closely related to empirical evidence of stock return predictability. Applying this model to 307 listed companies in Ho Chi Minh Stock Exchange (HOSE) using two multiples, P/B and P/E, the study showed that investment strategies using industry’s P/E is the most successful, while those based on P/B are not, despite various modifications of peer company choices. However, in evaluating the predictive power of these multiples, P/E appeared to be statistically insignificant and P/B had an unexpectedly positive correlation coefficient with stock price fluctuations. This result suggested critical implications in establishing stock returns predictors in the research context of Vietnam stock market.