The stock market crash - and after

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Monograph

Identifikator:: 1815583320

URN:: urn:nbn:de:zbw-retromon-204544

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The stock market crash - and after

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1930

Scope:: XXVI, 286 S.; graph. Darst

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VI. Changed Ratio of Prices to Earnings

Collection:: Economics Books

Changed Ratio of Prices to Earnings 89 fact, there had been a careful choice among the gen- eral groups of stocks and within those groups. In this process the price-earnings ratio might properly go up in certain cases because the public thought stocks less risky than formerly on account of the principle of “safety through diversification” or for other reasons, or because the rate of interest or its equivalent for stocks as a “basis” of discounted future earnings had been reduced, or because the public expected a more rapid increase of earnings in the future than they did formerly. On these accounts the price-earnings ratio for common industrial stocks appears to have risen in the last few years only from an alleged, traditional ten to one, to a 1324 ratio in September, 1929, or by only 35 per cent. With so many causes at work, the average effect of any one of these causes evi- dently does not need to be great in order to account for the whole “mystery.” The price earnings ratio for industrials fell to 9.8 in November, 1929, from a high point of 16.2 in January of that year. This ratio of 9.8 is the lowest since May of 1927, the earliest month for which such statistics are available. Prior to Novem- ber, 1929, the lowest ratio was 11.2 for May, 1927; the highest was 16.2 for January, 1929; so that the fall in November was to a point 40 per cent below the highest recorded. Static Conditions Have Given Way Thus, except for a few months in 1920 preced-

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