Observed and "fundamental" price earnings. Is there a dragging anchor for high-tech stocks?

By assuming that a large share of investors follows a fundamental approach to stock picking we build a discounted cash flow (DCF) model (which we assume to be commonly used by fundamentalists) and test on a sample of high-tech stocks whether the strong and the weak version of the model are supported by data. Empirical results show that, even though our "fundamental" price earnings explain a significant share of cross sectional variation of the observed price earnings, the strong version of the discounted cash flow model is rejected for the relevance of additional variables. These are the dividend payout, the number of recommending brokers, the sales to earnings ratio, the institutionals' share and a proxy of firm risk. We argue that all these variables are either signals of firm actual and future capacity of being profitable in a framework of imperfect information and/or proxies for the value of the real option of expansion which represents an important part of value for high-tech stocks. Empirical results of the paper therefore outline a new benchmark for testing market anomalies in which simple rules for building portfolios of value and glamour stocks (size, P/E, book to market), may be replaced by more sophisticated rules based on indicators of the deviation between fundamental and observed firm DCF (plus real option) values