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Relative Valuation

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  • Asheesh Pandey

Abstract

In this paper we studied the sectoral behavior of Indian capital market through relative valuation for a period over a period of 21 years. The period covered under the study is from 1990–2010. The study has been done both for a total period (1990–2010) and three sub-periods, viz. 1990–96, 1997–2003, 2004–10. The research finds that price multiple distributions tend to be non-normal prior to 2003. On post-2003 basis these sample distributions are approximately normal, thereby implying that mean and standard deviations are relevant descriptive statistic measures in the Indian context, for a more recent period. The study also finds that we cannot judge all the sectors by classifying them with single high or low price multiples. Different sectors tend to have different high and low multiples which stand true both for total period as well as for sub-periods.

Suggested Citation

  • Asheesh Pandey, 2012. "Relative Valuation," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 37(3), pages 179-193, August.
    • Handle: RePEc:sae:manlab:v:37:y:2012:i:3:p:179-193
    DOI: 10.1177/0258042X13484833
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    References listed on IDEAS

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    1. Skogsvik, Kenth & Skogsvik, Stina, 2001. "P/E-ratios in Relative Valuation - a Mission Impossible?," SSE/EFI Working Paper Series in Business Administration 2001:7, Stockholm School of Economics.
    2. Beaver, William & Lambert, Richard & Morse, Dale, 1980. "The information content of security prices," Journal of Accounting and Economics, Elsevier, vol. 2(1), pages 3-28, March.
    3. Jing Liu & Doron Nissim & Jacob Thomas, 2002. "Equity Valuation Using Multiples," Journal of Accounting Research, Wiley Blackwell, vol. 40(1), pages 135-172, March.
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