The August 15, 2007, issue of the New York Times included an article by David Leonhardt titled “Remembering a Classic Investing Theory.”
Instructions
Read the article and answer the following questions.
(a) At the time of the article, what was the average P-E ratio for the Standard & Poor’s 500-stock index? How did this compare with the average P-E ratio since World War II?
(b) What criticism did Graham and Dodd have of the way the P-E is usually measured today?
(c) Using the Graham and Dodd approach to measuring the P-E ratio, what was the P-E at the time the article was written, and how did it compare with its value in previous years?
(d) What does the article’s author say the Graham and Dodd P-E tells us about the stock market at the time the article was written?