Sunday, March 25, 2012

Initial P/E Ratio vs. 1-Year Stock Market Returns

This is the last in a series on the relationship between the P/E ratio at the time of purchase and the stock market returns that follow.

Previous posts have analyzed returns for the ensuing 20 years, 10 years, and 5 years. This post concludes the series by looking at returns for one year.

Scatter Diagram: Initial P/E Ratio vs. 1-Year Stock Market Performance 

Scatter diagram: initial P/E ratio, 1-year stock market return/performance
Starting P/E Ratio vs. 1-Year Returns

The above scatter plot (click on image to expand) shows the historical relationship between the price/earnings ratio of the stock market at the time of purchase and

Thursday, March 15, 2012

The Impact of Starting P/E Ratio on 5-Year Stock Market Returns

In this post, we'll look at the impact of P/E ratio at time of purchase on subsequent 5-year stock market performance. Previous posts in this series presented the results for 10 years and for 20 years.

Scatter Diagram: Initial P/E Ratio vs. 5-Year Stock Market Performance


Scatter diagram: initial price/earnings ratio, 5-year DJIA/stock market performance

The above scatter plot (click on image to expand) shows the historical relationship between the price/earnings ratio of the stock market at the time of purchase and the market's return over the next 5 years. In the chart, each dot represents