Basu found that firms with high P/E ratios ________.

A) earned higher average returns than firms with low P/E ratios
B) earned the same average returns as firms with low P/E ratios
C) earned lower average returns than firms with low P/E ratios
D) had higher dividend yields than firms with low P/E ratios

P/E Ratios

The Price-to-Earnings Ratio is a valuation metric used to measure a company's current share price relative to its per-share earnings.

Average Returns

The arithmetic mean of a series of returns generated over a period of time.

Dividend Yields

Dividend yields represent the ratio of a company's annual dividend payments to its current stock price, indicating how much an investor earns in dividends relative to the share price.