A stock’s price/earnings (P/E) ratio is the per-share price of its stock divided by the company’s annual earnings per share. The P/E ratio for the stock market as a whole is used by some analysts as a measure of whether stocks are cheap or expensive, in comparison with other historical periods. Table 3.3 shows some annual P/E ratios for the New York Stock Exchange (NYSE). Calculate the mean and standard deviation. The stock market reached a peak in August 1987, when the Dow Jones Industrial Average topped 2,700. The Dow slipped back to 2,500 in October of 1987 and then to 2,250. Then, on a single day, October 19, 1987, the Dow fell by 508 points. At its August 1987 peak, the market’s price/earnings ratio was 23. Was this P/E value more than two standard deviations above the mean P/E for 1970–1986? Was it more than 1.5 times the interquartile range above the median? Draw a box-and-whiskers diagram using these 1970–1986 P/E data.

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Year P/E Year P/E Year P/E 1970 15.5 1976 11.2 1982 8.6 1971 18.5 1977 9.3 1983 12.5 1972 18.2 1978 8.3 1984 10.0 1973 14.0 1979 7.4 1985 12.3 1974 8.6 1980 7.9 1986 16.4 1975 10.9 1981 8.4