Comparing the Rate of Return on Investment and the Risk of Portfolios between PE Ratio and PEG Ratio of Stocks in SET 100

  • ชนานาถ เทศวิเชียรชัย
  • สมพร ปั่นโภชา
Keywords: PE Ratio, PEG Ratio, Sharpe Ratio, Dividend Yield, Earnings Growth

Abstract

At the present time, The PE Ratio has been used to select a stock in a portfolio investment but the PE Ratio may not to tell the market trends as be up or down trends. For example, a stock with be able a low PE but that is on a downtrend which isn’t more interest than a stock with a high PE Ratio but is on a up trends. Therefore in this research we use the average earning growth rate for 5 years (Earnings Growth)  to calculate the PEG Ratio which PE Ratio dividing by Earnings Growth, And the PEG Ratio has been used to select the stock in SET 100 for the investment portfolio.

Comparing the PE Ratio and PEG Ratio by using Sharpe Ratio as a measure of which tools can give a better rate of return. The value of the PEG Ratio should be equal to 1 or less than 1 but not less than 0(0<PEG<1).  The results found that portfolios that use the PEG Ratio to select stocks to the portfolio can provide better return than that use the PE Ratio, but also offer a higher risk as well. This research uses the Sharpe Ratio to perceive the suitability between the rate of return and risk. Which the portfolios using the PEG Ratio can give the Sharpe Ratio greater than that use the PE Ratio and when adding dividend yield condition to select stock, the PEG Ratio can provide a more suitable Sharpe Ratio but not different risk.

Published
2020-08-19

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