What variables drive differences in price-to-earnings ratios (P/E) across U.S. stocks? In the September 2025 revision of their paper entitled "The Cross-section of Subjective Expectations: Understanding Prices and Anomalies", Ricardo Delao, Xiao Han and Sean Myers analyze cross-sectional P/E differences of U.S. common stocks by comparing:
Professional forecasts of earnings growth, return and P/E over the next four years.
Actual (realized) earnings growth, returns and P/E over the next four years.
Using the specified forecasted and actual data during 1999 (1982 for some inputs) through 2020, they find that:
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