Shown below is a correlation table showing correlation coefficients between stock price, earnings per share (EPS) and price/earnings (P/E) ratio for a sample of 19
Publicly traded companies.Which of the following statements is false?
Correlations: Stock Price, EPS, PE
A)EPS is the best predictor of stock price.
B)The strongest correlation is between EPS and stock price.
C)There is a weak negative association between PE and EPS.
D)PE is the best predictor of stock price.
E)The weakest correlation is between PE and EPS.

Question

Shown below is a correlation table showing correlation coefficients between stock price, earnings per share (EPS) and price/earnings (P/E) ratio for a sample of 19
Publicly traded companies.Which of the following statements is false?
Correlations: Stock Price, EPS, PE 
A)EPS is the best predictor of stock price. 
B)The strongest correlation is between EPS and stock price. 
C)There is a weak negative association between PE and EPS. 
D)PE is the best predictor of stock price. 
E)The weakest correlation is between PE and EPS.

Quizplus · Accepted Answer

The false statement is A)EPS is the best predictor of stock price. The correlation coefficient between stock price and P/E ratio is the highest among the three variables, indicating that P/E ratio is the best predictor of stock price.

Shown Below Is a Correlation Table Showing Correlation Coefficients Between