The price of a stock with a low relative P/E will tend to be more volatile than the price of a stock with a high relative P/E.

Question

Quizplus · Accepted Answer

Stocks with low P/E ratios generally have lower earnings and growth expectations, which can lead to more price volatility as investors adjust their expectations for the company's future performance. In contrast, stocks with high P/E ratios often have higher earnings and growth expectations, which can provide some cushion against price swings.

The Price of a Stock with a Low Relative P/E