Scientific Research and Invention 141 
as the insiders, who have carefully weighed and 
measured the future prospects, and who have bought 
the stock when the current earnings were near zero, 
making a price-earnings ratio of even over 100 to I 
for the time being. That is what happens when- 
ever one ‘‘gets in on the ground floor.” 
The more recent the invention, the higher the ratio 
of price to- earnings is apt to be, because in its early 
stages the earnings have not had time to develop. 
It follows that the larger the number of stocks 
representing new inventions in the price index, as 
compared with the number of stocks of the ordinary 
variety, the higher the price-earnings ratio of the 
whole group. It further follows that today, with 
so many more of these new-invention companies 
listed on the stock exchange, the price-earnings ratio 
should be higher than formerly. With the increased 
application of research, American investors are jus- 
tified in greater expectations of future dividends.