The P/E Effect

Posted by on Jan 9, 2013 in Academic, Economics, Investing, Statistics

According to the efficient market hypothesis no publicly available information can be used to produce excess returns consistently. However, a persistent pattern exists between current stock prices, earnings, and future returns, all of which are readily available to the public, which could be used to generate excess returns over the long run. An analysis of the S&P composite from 1871 to 2012 showed that a strong negative correlation exists between the 10 year average P/E ratio of the S&P composite (PE10) and the succeeding 20 year return of the the composite. Presumably, one could...

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How Much Is A Life Worth?

Posted by on Dec 28, 2012 in Academic, Economics, Statistics

What is the value of a human life? To most people the immediate response may be “priceless” or “infinite”. However, when considering a world with finite resources and the inevitable risk of death that arises from various human activities, one would have to admit that there is a limit to the value one places on a human life. If one were to truly value a human life as infinite one would exhaust all resources on simply preserving human life. This is not reasonable. It is impossible to save every life, so in the real world some trade-offs must be made. Some risk of death must be admitted...

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