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Technology Stocks : MSFT Internet Explorer vs. NSCP Navigator
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To: Reginald Middleton who wrote (20082)6/17/1998 3:13:00 PM
From: Charles Hughes  Read Replies (1) of 24154
 
>>>For those of you that wanted proof of the folly of following earnings, see rcmfinancial.com;

I did look and it was interesting (!)

I'm wondering about one thing though. I didn't notice the time frames for your correlations. My conclusion about this based on my experience is that earnings have a low correlation to stock price when the correlation is quantized at the quarterly reporting interval or more frequently. However, earnings to stock price with a 3 year smoothing of the quarterly earnings reports yields a much better correlation.

From this I have concluded that earnings reports (except as one predictor of short term market sentiment) are fairly useless for the trader. However, they are very useful for the long term (hold for 5+ years) investor.

Comments?

Have a nice day,
Chaz
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