This paper examines the time-series relation between the price-earnings (P/E) multiple and market volatility for the G-7 markets. If investors are risk-averse agents and demand a higher required rate of return to take on more risk, then we should expect P/E to be inversely related to volatility....

Using numerical simulation, recent research on the properties of unit root tests in the presence of generalised autoregressive conditional heteroskedasticity (GARCH) is extended. The principal development concerns consideration of relative properties of linear and non-linear unit root tests in...