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Factor market |
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Factor marketThe market for a factor of production, such as labor or capital, in which supply and demand interact to determine the equilibrium price of the factor.Similar MatchesRisk factorRisk factorIn arbitrage pricing theory or the multibeta capital asset pricing model, the set of common factors that impact returns, e.g., market return, interest rates, inflation, or industrial production. Annuity factorAnnuity factorPresent value of $1 paid for each of t periods. Price earnings growth factorPrice earnings growth factorThe PEG of a company is calculated by dividing its prospective P/E ratio by the estimated future growth rate in earnings per share of the company. So to calculate a PEG, you first need to calculate its P/E ratio.P/E = current share price divided by earnings per shareA company with a share price of 100p and earnings per share of 5p has a P/E ratio of 100/5 = 20.By itself the P/E ratio is a useful ratio because it shows how many times the current earnings the shares cost - in a sense, how many years you would have to wait to get your money back if the company paid out all its earnings to shareholders. But the limitation of the P/E ratio is that it looks at historical information and does not relate the price of the shares to its future performance. The PEG ratio builds in that extra layer of sophistication.Using the example of the same company, imagine that the consensus brokers' forecast for its future earnings growth rate is 15%.PEG = P/E divided by estimated future growth rateFor this company, the PEG would be 20 divided by 15 = 1.33.According to Jim Slater, the investor who popularised the use of PEG's as a stock share selection tool, a share with a PEG of 1 or lower is attractive. Put simply, the lower the PEG, the less you are being asked to pay for estimated future earnings. Jim Slater did not recommend use of the PEG as the only criteria of share selection. There are plenty of other fundamental checks that have to be made too.Note that the estimated future earnings are a critical part of the PEG calculation, and that if the forecasts made by brokers are wide of the mark, the PEG ratio will be unreliable. Because of this danger, most advocated of PEG's recommend using consensus forecasts, rather than the forecasts of any single broker/analyst. Factor abundanceFactor abundanceThe abundance or scarcity of a primary factor of production. Because, in the short run at least, the supplies of primary factors are more or less fixed, this can be taken as given for determining much about a country's trade and other economic variables. Fundamental to the H-O Model. Factor scarcityFactor scarcitySee factor abundance. Further SuggestionsV Vacancy FactorDiscount factor Factor-saving Factor price equalization International factor movement Factor endowment Factor accumulation Tariff factory Common factor Factor of production Specific factors model Present value factor Abundant factor Total factor productivity Specific factor Factor price Factor-price space Factor Price Equalization Theorem Amortization factor Factor Proportions Model Factor content Factor mobility Pool factor Factor intensity reversal Factor portfolio |
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