Application of financial market multiples in stock market decision-making: the case of NASDAQ OMX Riga
2013
Zelgalve, E., University of Latvia, Riga (Latvia). Faculty of Economics and Management
The paper investigates the use of financial market multiples in share trading decision-making on the NASDAQ OMX Riga Stock Exchange. First, the paper analyses the current research in the field of financial market multiples. It is followed by the calculation of financial market multiples in four public limited companies whose shares are traded on the Baltic Main List. The author puts forward recommendations on buying, holding, or selling shares. P/E and P/B multiples show approximately the same degree of accuracy for prediction of stock price changes one year ahead. The accuracy of predictions is greater than 50% which indicates that both multiples play a role in stock price prediction and share trading decision-making. The author concludes that, in Latvia, like in other markets, over time, the P/E ratio has a tendency to revert to a certain average.
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