stock market

Is the Australian Stock Market Expensive?

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To determine whether a stock is cheap or expensive, investors generally use the price to earnings (P/E) ratio. Historical information can be used to compare how expensive a company is in comparison to how the share price has traded over time. Price per earnings can also be compared to other stocks in same industry. That way we can also determine whether individual stocks are expensive relative to their peers. What is the P/E ratio? The price per earnings formula is …

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Does the stock market represent the economy?

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It would be rational to think there is a relationship between the economy and the stock market. If the economy is performing well, then it could be assumed that economic growth would enhance the profitability of a company and hence improve their stock price. In a recession, companies can encounter lower profits. This may mean reduced dividends for stockholders and a falling share price.  There have been numerous studies on this argument. One such study performed by Dimson, Marsh and …

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