Logic behind p/e ratios in stock market.why 15(approx) is cosiderd more or less ideal?
Answers: this is capitalisation factor for about 6/7 % interest rates.
If P/E was not better than bank rates why people should take risk on stock market.
PE ratios vary across sectors, 15 may be good for one sector and either high or low for another.
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Price-to-Earnings, Dividend Yield, Price-to-Book, Price-to-Earnings-to-Growth, etc. are all SUPERFICIAL measures of value.
When these measures mean something, it's usually at extremes. Coca-Cola is a bad buy at a P/E of 50 but a wonderful buy at a P/E of 5. Even then though, there could be exceptions -- earnings last year is not always a good predictor of value.
Over long periods of time, the stock market is like a weighing machine: the price of a stock is metaphorically anchored by the intrinsic value of the interest in the underlying business.
See my answer to this other question for more: http://answers.yahoo.com/question/index;...
How do u divide what the effectiveness of a stock is?
I want to know if a stock is overvalued or undervaluedAnswers: The intrinsic significance of a stock, bond, business prospect, or anything you may want to invest in is the meaning of the future dosh flows that can be expected to flow into and out of that prospect, discounted at an appropriate rate.
For a share of stock, the cash flow mode dividends (after any taxes) you can expect to receive on that share. For a bond this means interest (after any taxes) you can expect to receive on that issue. For a business prospect it's the dosh flows you will inject and extract.
As for the appropriate discount rate, you should use the expected return of your best alternative. Another way is to use a worldwide agreed upon risk free rate, for example the yield on long-term bonds issued by stable government, plus an extra allowance for risk assumed. Many people use 8-12% as their discount rate -- but it depends mightily on the application!
expediency of the stock is market determined, it can be over or underneath valued - an individual will be silence spectator in the entire spectator sport - you cannot do anything even you know the very reality.
if you are a long term investor you hold an excellent advantage - tolerate you enter the market at any time by choosing a stock which have growth - sector (booming sector)advantage, etc., at one point of time that particular sector contained by general and that fastidious stock in precise will catch the eye, by that time entire flea market will be behind that stock and obtain over valued - here you get ascendancy of selling the stock and look for a stock which is over looked by the market surrounded by spite of its intrinsic value.
a winter sport of complex nature to be played next to excess saving -- not next to borrowed money.
What will be the impact of recent crash in equity valuations in India on the prices of Indian realty?
Answers: India is a vast country, and the impact will obviously vary depending on which part of the country you're looking at. In general terms though, stock market turbulance will make realty prices much more volatile and depress them through to the middle of the year.
So, buying realty in India is still a good idea. The growth story is not going away. But I would hold off a few months until there is clarity on how deep the US depression will be and more confidence in the equity market. That feels unlikely until the third quarter of this year (July - Sept).
The other factor that might impact prices is more local. If Pakistan kicks off in a big way, Indian realty prices will be decimated.