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Technology Stocks : Dell Technologies Inc.

DELL 133.20

+5.7%

Nov 26 3:59 PM EST

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To: hsg who wrote (79574)	11/13/1998 2:30:00 AM
From: michael modeme	Read Replies (1) of 176387

That is why I said that the P/E ratio is a measure of the risk involved in purchasing stock. I am specifically refering to diffusion models of the form: d¿(x(0),x,t)/dt = Exp{ dM(t)/dt + 0.5 d(V^2)(t)/dt }; where ¿(x(0),x,t) is the probability density of the share price (could be nonstationary), M(t) is the drift term, and V(t) is the variance term. Under this model, the results that I've posted follow, and it looks like these types of models fit the empirical data well. I should also point out that these types of models indicate that one should by companies like DELL that have their earnings growing at enormous rates, if you are willing to tollerate the risk (P[X(t) < µ \| X(s)], for some predefined value of µ). Options require a differet strategy since it can be shown that under such a model there is little dependence on the drift term, and a large dependence on the volatility term. Good luck. Cheers

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