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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (14741)	8/13/2001 6:53:44 AM
From: Paul Shread	Read Replies (1) \| Respond to of 52237

Doesn't explain 1932, the other time PEs got that low.

To: Haim R. Branisteanu who wrote (14741)	8/13/2001 8:38:43 AM
From: PMG	Respond to of 52237

true, expected return on stock is related to the risk free rate: r = beta(rm-rf) + rf rf: risk-free rate (rm-rf): risk premium on stock market) beta: risk of asset moreover, inflation adjusted rates should be used. (rm-rf) is sort of a constant that expresses that the risks of businesses are generally higher than "safe" gov. bonds. LT this risk premium has been about 8.4% So, with the risk-free rate @ 3% LT expected return on the stock market should be ~ 11.3% (nominal) when beta=1