Overview
The price-earnings ratio, or P/E, is the most commonly quoted investment statistic, but have you ever considered what it actually means? For most people it's a shorthand way of deciding how highly the market regards a company, with investors prepared to overpay for earnings from a high-P/E 'glamour' stock as opposed to a low-P/E 'value' stock. However, academics have known since 1960 that the opposite is true: value stocks outperform glamour stocks consistently over decades. A company with a low P/E may have been marked down for no readily apparent reason and thus could represent an attractive value investment for those with the patience to wait while the market re-values it. However, the P/E is a backward-looking measure and just because the company earned GBP1 per share last year it doesn't necessarily mean it will earn anything like that in the foreseeable future. Or, a low P/E can mean a company is deservedly cheap because it is in financial difficulty - in this case the company is likely to become cheaper yet or even go into administration. This book is a practical guide to how you can adjust and improve the price-earnings ratio and use it, alongside other financial ratios, to run against the crowd and boost your stock returns.
Full Product Details
Author: Keith Anderson
Publisher: Harriman House Publishing
Imprint: Harriman House Publishing
Dimensions:
Width: 15.60cm
, Height: 1.20cm
, Length: 23.40cm
Weight: 0.313kg
ISBN: 9780857190802
ISBN 10: 0857190806
Pages: 214
Publication Date: 04 June 2012
Recommended Age: From 18 years
Audience:
Professional and scholarly
,
Professional & Vocational
Format: Paperback
Publisher's Status: Active
Availability: In Print
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Reviews
This book offers essential scientific reassurance, as well as practical tools, to triumph over misconceptions and behavioral errors that distort stock market prices. I recommend it to readers with great enthusiasm. --Werner De Bondt, DePaul University
This book offers essential scientific reassurance, as well as practical tools, to triumph over misconceptions and behavioral errors that distort stock market prices. I recommend it to readers with great enthusiasm. -- Werner De Bondt, DePaul University
Author Information
Author Website: http://www.harriman-house.com/pages/authors.htm?Index=17087&Author=Keith_Anderson
After completing his BSc in Mathematical Statistics and Operational Research at Exeter, Keith Anderson worked for some years as a systems developer, most recently at Deutsche Bank in Frankfurt. He then did an MSc in Investment Analysis at Stirling, where he won the Morley Prize as the top academically in his year. For his PhD at the ICMA Centre, Reading University, Keith showed that different ways of calculating the Price-Earnings ratio could significantly improve investor returns. He worked as a lecturer at Durham University Business School for two years before moving to York in 2008. Keith has written a number of books, papers and articles.
