The P/E Multiple and Market Volatility

Alex Kane, Alan J. Marcus and Jaesun Noh

Financial Analysts Journal, 1996, vol. 52, issue 4, 16-24

Abstract: The market multiple is highly sensitive to volatility. These empirical results suggest that a permanent 1 percentage point increase in market volatility can, over time, reduce the market multiple by 1.8. Hence, any assessment of market valuation that ignores the impact of volatility on the equilibrium P/E is inherently perilous.

Date: 1996
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DOI: 10.2469/faj.v52.n4.2007

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