Agreed. I went with the first Google search result that was at all close to the question at hand; I recommend anyone more interested in the subject collect the data and run the numbers themselves.
In particular, one might want to compare residual P/E ratios—that company’s P/E minus the S&P 500′s P/E or the total stock market P/E—to future earnings growth in order to try to remove some of the time-dependent effects and specifically judge the market’s ability to guess the earnings growth of individual companies.
One could, if they knew historical industrial groupings, judge the market’s ability to price the overall market, industries, and individual companies. It seems like we would expect the first to be better than the second, which is itself better than the third. This is both for the raw statistical reason that the sample being averaged over is smaller as we go down, making the range of reasonable numbers larger, and the financial reason that forces on larger scales may be more visible or predictable than forces on smaller scales.
Agreed. I went with the first Google search result that was at all close to the question at hand; I recommend anyone more interested in the subject collect the data and run the numbers themselves.
In particular, one might want to compare residual P/E ratios—that company’s P/E minus the S&P 500′s P/E or the total stock market P/E—to future earnings growth in order to try to remove some of the time-dependent effects and specifically judge the market’s ability to guess the earnings growth of individual companies.
One could, if they knew historical industrial groupings, judge the market’s ability to price the overall market, industries, and individual companies. It seems like we would expect the first to be better than the second, which is itself better than the third. This is both for the raw statistical reason that the sample being averaged over is smaller as we go down, making the range of reasonable numbers larger, and the financial reason that forces on larger scales may be more visible or predictable than forces on smaller scales.