Journal of Finance and Economics
ISSN (Print): 2328-7284 ISSN (Online): 2328-7276 Website: Editor-in-chief: Suman Banerjee
Open Access
Journal Browser
Journal of Finance and Economics. 2021, 9(5), 201-208
DOI: 10.12691/jfe-9-5-5
Open AccessArticle

Do MCAP and P/E Ratios Have an Impact on the EPS of High and Low Beta (β) Firms? An Analysis of Covariance on Select Companies!

Elango Rengasamy1,

1Finance & Banking, GBS Dubai, Block 5, Dubai Knowledge Park – UAE

Pub. Date: November 01, 2021

Cite this paper:
Elango Rengasamy. Do MCAP and P/E Ratios Have an Impact on the EPS of High and Low Beta (β) Firms? An Analysis of Covariance on Select Companies!. Journal of Finance and Economics. 2021; 9(5):201-208. doi: 10.12691/jfe-9-5-5


Earnings Per Share (EPS), among other measures, is considered as a reliable tool of risk analysis, financial performance, growth, and success of companies. The current study attempts to examine if high and low-beta firms have yielded returns that commensurate with the risk, meaning, ‘the higher the risk, the higher the returns and the lower the risk, the lower the returns’, in terms of share price returns and other yardsticks. ANCOVA test was applied on the high-beta (14) and low-beta (36) sample companies. The results threw a few interesting insights. In conformity with the existing literature, high-beta firms yielded higher returns and low-beta firms, lower returns. While MCAP (Covariate) had a statistically significant influence on the dependent variable EPS, P/E ratio (Covariate) did not exhibit any significant influence on the EPS.

beta ANCOVA share price returns market capitalization price-earnings ratio earnings per share

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


[1]  Hunjra, A. I., Ijaz, M. S, Chani, M. I., Hassan, S. & Mustafa, U. (2014). Impact of Dividend Policy, Earning per Share, Return on Equity, Profit after Tax on Stock Prices. International Journal of Economics and Empirical Research. 2(3), 109-115.
[2]  Natasha, R., Rikus, V., Lana H., (2017), “The Effect Of Earnings Per Share Categories On Share Price Behaviour: Some South African Evidence”. The Journal of Applied Business Research, January/February 2017 Vol.33, No.1, 141-152.
[3]  Andrea, F., Lasse H. Pedersen (2011), Betting Against Beta, Swiss Finance Institute Research Paper Series N°12-17.
[4]  Harrison, H., & David A., (2016), Speculative Betas, The Journal of Finance, Vol. 71, No. 5 (October 2016), pp. 2095-2144. Published By: Wiley.
[5]  Joost, D., Tse-Chun L., & Ludovic, P., (2012), 'A New Method to Estimate Risk and Return of Nontraded Assets from Cash Flows: The Case of Private Equity Funds', The Journal of Financial and Quantitative Analysis, Vol. 47, No. 3 (June 2012), pp. 511-535.
[6]  Christopher, C., & Mikhail, S (2016) Two Centuries of Price-Return Momentum, Financial Analysts Journal, 72: 5, 32-56.
[7]  Xiaowei, K (2012), 'Valuating Alternative Beta Strategies', The Journal of Indexes Europe, Article published in the March/April 2012,
[8]  Steven L. H, K. Geert R.K., & Roberto E. W, (1997), ‘The Role of Beta and S ize in the Cross-Section of European Stock Returns’, European Financial Management, April, 1997.
[9]  Wouter, J.K (2014). ‘Momentum, Markowitz, and Smart Beta: A Tactical, Analytical and Practical Look at Modern Portfolio Theory, Risk Management e-Journal.
[10]  Markowitz, H.M. (March 1952). “Portfolio Selection”. The Journal of Finance. 7 (1): 77-91.
[11]  Renata, T.K., Lopes, F., Luiz, P.L., Favero (2019), Financial Indicators, informational environment of emerging markets and stock returns – RA USP Management Journal!, (2019) Vol.54, No.3 PP 253-268.
[12]  Ahmad, T.S., Kashif, I. S., (2018), 'Assessing Linkage between Community and Financial Inclusion in India - Journal of Commerce and Management Thought!, (2018) Vol. 9-1, PP 111-119.
[13]  Javier, E., Ana, P, (2005), “Risk and Return in Emerging Markets, Family Matters.” Journal of Multinational Financial Management, July 2005 Vol.15, Issue, 3, 257-272.