Nicholas Apergis, Ph.D., Department of Banking & Financial Management, University of Piraeus, 80 Karaoli & Dimitriou Str, Piraeus, 18534, Greece and Christina Christou, PhD, Banking & Financial Management, University of Piraeus, 80 Karaoli & Dimitriou, Piraeus, 18534, Greece.
The objective of this paper is to investigate whether any pattern of convergence of international earnings-to-price ratios for a sample of 21 countries over the period 1980-2007 can be detected through the methodology of Phillips and Sul (2007), which is based on a quite general form of a nonlinear time varying factor model and it can be interpreted as an asymptotic cointegration test without suffering from the small sample problems of unit root and cointegration testing. The preliminary results show that such a convergence is present. Next, the study aims at detecting any potential factors supporting the pattern of convergence. The new empirical findings reveal that such convergence patterns mainly reflect convergence not only in economic factors but also convergence in accounting practices.