Market volatility may be termed as frequent changes in share price, may be favourable or unfavourable. Share price is equal to EPS(earning per share) multiplied by P/E ratio. Thus
Share price = P/e ratio * EPS
Thus share price is a function of p/e ratio & eps. Being function of EPS alone, it means the price is determined based upon fundamentals of the company & industry ie their performance. And in this situation the p/e ration remains at constant level. On the other hand, share price depends upon p/e ratio implies that it depends on something outside the company performance viz high influx of FII investments, political factors, crr hike, repo rate reduction etc. But in real life , the share price doesnt depend upon any of these two factors alone. It depends upon both these factors. It is very difficult to quantify extent upto which it depends on these two factors, it is based upon market response, economic factors, political stability, industry returns etc.
Share price = P/e ratio * EPS
Thus share price is a function of p/e ratio & eps. Being function of EPS alone, it means the price is determined based upon fundamentals of the company & industry ie their performance. And in this situation the p/e ration remains at constant level. On the other hand, share price depends upon p/e ratio implies that it depends on something outside the company performance viz high influx of FII investments, political factors, crr hike, repo rate reduction etc. But in real life , the share price doesnt depend upon any of these two factors alone. It depends upon both these factors. It is very difficult to quantify extent upto which it depends on these two factors, it is based upon market response, economic factors, political stability, industry returns etc.
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