Role Of Statistics In The Equity Market


Statistics about shares play an important role in deciding the price of a share in the stock market. Some common information about shares that all investors should study before investing in scrips include the earnings per share (EPS), price to earnings ratio (P/E), dividend paid, promoter's stake in the company, liquidity, share price in the previous year and so on.

Earnings per share and Price to Earnings Ratio

The EPS is the indicator of whether the share is correctly valued at present. If the earnings are high compared to other stocks in the sector, there is scope for increase in the share price and as such the investor would be advised to invest in the share.The EPS also helps the investor fix their exit price.

Past Dividends

The dividend paid by a company over the years reflects the health of the company. A healthy dividend over the years indicates sound management practises.

Number of Shares Traded

Another important statistic is the number of shares traded everyday. The greater this number, the greater the liquidity of the share. This is an important factor in deciding to buy scrips of a particular company because illiquid shares are difficult to dispose off.

Promoters' Stake

The promoters' stake in the company gives an idea of what the promoters think of the prospects of the company and as such should be looked into. The greater the promoters stake, the better the company is likely to perform.

Average Price in Previous Year

The average price of the share in the previous year is yet another indicator of where the stock's prices are likely to go in the future. This is unless there has been any new developments in the company or sector that would justify an increase in share price.

Investment by Mutual Funds

The number of shares held by mutual funds of good reputation is also an indicator of a company's health. Mutual fund managers are sure to have done a through study of the company before investing in it and so one can consider following in their footsteps.

These are some of the statistics that an investor has to look into before investing in the shares of a particular company.