Journal Press India^®

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The main objective of this paper is to identify investor behavior in the Colombo Stock Exchange by using price multiples and the corresponding value drivers. This study uses widely available and easily identifiable three price multiples (price earning,Price to book value and price to sales ratios) and corresponding three value drivers (earning per share, the net book value per share and sales). The main source of data for this study are secondary data from the Columbus Stock Exchange and published annual report of the 61 sample companies which covers 80% of the market capitalization. The regression analysis is used to forecast price and obtain the pricing error between the actual and forecast prices. The main finding indicate that the netbook value is the best value driver among all others for the entire market hold investors behavior. The best value driver is earning per share except for food, beverage and tobacco category. It is therefore recommended to use the netbook value price per share as the main value driver for the valuation of stocks in the columbo Stock Exchange except for food, beverage and tobacco sector companies.

Keywords

Investor Behaviour, Colombo Stock Exchange: CSE, Price Multiples, Value Drivers, Sri Lanka.

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