Firms with P/E ratios higher than the overall market ratio are expected to provide greater than normal returns with equal or less risk.

Question

Quizplus · Accepted Answer

Firms with higher P/E ratios are generally considered to be growth stocks, which have the potential to provide greater than normal returns. However, these stocks also come with greater risk, as they are more volatile than the overall market.

Firms with P/E Ratios Higher Than the Overall Market Ratio