![]() ![]() ![]() Throughout, the authors guide the reader through the existing theoretical and empirical literature while also building on their own theoretical approach. Beginning with a review of the history of financial crises and providing readers with the basic economic tools needed to understand the literature, the authors construct a series of increasingly sophisticated models. Based on ten years of research, the authors develop a theoretical approach to analyzing financial crises. What causes a financial crisis? Can financial crises be anticipated or even avoided? What can be done to lessen their impact? Should governments and international institutions intervene? Or should financial crises be left to run their course? In the aftermath of the Asian financial crisis, many blamed international institutions, corruption, governments, and flawed macro and microeconomic policies not only for causing the crisis but also unnecessarily lengthening and deepening it. ![]() A primary challenge in using the method is the choice of a moving average for capitalized earning power. The article compares actual historical P/Es with hypothetical P/Es-the reciprocal of the deviations of current earnings from estimated earning power-and discusses deviations of history from theory and what the deviations reveal about investor opinions of prices and future earning power in certain times. To the extent that stock prices depend on value, the deviations of current earnings from earning power determine the extent of needed compensation or discount in the price. ![]() It establishes the view that capitalized earning power is an operational expression of value in the stock market, and it derives the relationships among current earnings, earning power, and the P/E. This article provides a blueprint of the operating mechanism of the price-to-earnings ratio in the valuation process. But this ideal cannot be attained, and investors must find a way of substituting an operational concept that is practical and works. In theory, true investment value cannot change it is always determined by future dividends and interest rates. ![]()
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |