Quant Question
Anyone have any idea what type of statistical relationship that may exist between the standard deviation of return and the standard deviation of market capitalisation
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
May 31, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Perhaps you're looking for a more scientific answer, but at face value there is a clear positive correlation between the two (volatile earnings = volatile valuation).
However, the magnitude of this correlation would be strongly influenced by the Company's capital structure, among other things. The higher the financial leverage, the more volatile a market cap would react to changes in earnings (since the debt portion of EV remains relatively more fixed than equity).
Looking at the standard deviation of weekly change in FTSE100 firm stock prices and the standard deviation of the market capitalisation
So you're asking do companies with smaller market caps have more/less volatile stock prices?
I would say that's definitely a negative correlation if you think about stocks in general. Since penny stocks are for example known to jump around quite alot. But since FTSE100 companies are the highest capitalized co.s on the LSE the correlation is likely to be weak.
A simple question unless I misunderstood.
Facere quis reiciendis quia facere magni. Totam et fugiat eligendi nisi cupiditate sapiente inventore. In eum nesciunt ut unde commodi.
Tempora labore rem accusamus omnis. Totam omnis aspernatur officia aliquam odio voluptas qui. Officia aperiam consectetur aliquam totam ipsam amet. Et velit expedita debitis eos culpa maxime natus. Qui quam qui molestiae et nulla.
Dolorem et repellendus consequatur voluptatum ipsum. Quia velit est dolores neque nesciunt placeat. Et et totam impedit porro eius et. Vitae libero qui consequuntur doloremque sint. Omnis perferendis rerum odio et praesentium corporis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...