The Essential P/E: Understanding the Stockmarket Through the Price Earnings Ratio

Harriman House Limited
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The price-earnings ratio, or P/E, is the most commonly quoted investment statistic, but have you ever considered what it actually means? For most people it's a shorthand way of deciding how highly the market regards a company, with investors prepared to overpay for earnings from a high-P/E 'glamour' stock as opposed to a low-P/E 'value' stock. However, academics have known since 1960 that the opposite is true: value stocks outperform glamour stocks consistently over decades. A company with a low P/E may have been marked down for no readily apparent reason and thus could represent an attractive value investment for those with the patience to wait while the market re-values it. However, the P/E is a backward-looking measure and just because the company earned 1 per share last year it doesn't necessarily mean it will earn anything like that in the foreseeable future. Or, a low P/E can mean a company is deservedly cheap because it is in financial difficulty - in this case the company is likely to become cheaper yet or even go into administration. This book is a practical guide to how you can adjust and improve the price-earnings ratio and use it, alongside other financial ratios, to run against the crowd and boost your stock returns."
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About the author

After completing his BSc in Mathematical Statistics and Operational Research at Exeter, Keith Anderson worked for some years as a systems developer, most recently at Deutsche Bank in Frankfurt. He then did an MSc in Investment Analysis at Stirling, where he won the Morley Prize as the top academically in his year. For his PhD at the ICMA Centre, Reading University, Keith showed that different ways of calculating the Price-Earnings ratio could significantly improve investor returns. He worked as a lecturer at Durham University Business School for two years before moving to York in 2008. Keith has written a number of books, papers and articles.

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Additional Information

Harriman House Limited
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Published on
Dec 31, 2012
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Business & Economics / E-Commerce / Online Trading
Business & Economics / Personal Finance / Investing
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Eligible for Family Library

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Overview :
"A book on Technical Analysis written for the Investor

Yes, it is possible to use technical analysis for investing, not just trading! Technical analysis has always been seen as a tool for short-term trading rather than investing. Through this book, the author will share with investors an original approach to technically define the trend for the various time frames - Daily, Weekly, Monthly and so on. The book will reveal the consistent relationship between the time frames. It explains which time frame dictates a market's behavior and shows how to invest better with the knowledge of the larger time frames.

The book's second innovation is to help investors integrate technical trend, timing and price indicators for market entry and exit. This approach "integrates" signals from various technical tools rather than rely on signals from a single indicator, whether it be timing or price for entry and exit. This integrated approach has been effectively used by the author for investing for many years.

Learn :
•    Time tested techniques to define a market's trend
•    To integrate trend, timing and time indicators for optimal market entry and exit in trending and non-trending market environments
•    About the two-way  and three-way relationships between monthly, weekly and daily time frames
•    How to invest better with the knowledge of the relationship of multiple time frames of markets

About the author

BC Low (CMT) has been a teacher-cum-practitioner in Technical Analysis since the 1980s. Low has published in Technical Analysis of Stocks & Commodities in September 2010 and November 2012. He has delivered many seminars to various financial institutions in Singapore and abroad. He was the President of the Singapore Technical Analysts & Traders Society (STATS) in 2011-13. Formerly a Senior Lecturer in Singapore Polytechnic, he developed and taught two modules of Technical Analysis from 1992 to 2011. He was the technical analyst at Merrill Lynch International Bank, and currently Low is President of Technical Analysis Consultancy, Singapore.



Chapter 1 Introduction                                       
Technical Analysis is about Probability
Technical vs Fundamental Analysis
Where does Technical Analysis work best?
Holy Grail versus a Tool Box
Integration is Key
Technical Analysis is also for long-term investment

Chapter 2  Forecasting Trend with Price Action
Defining Trend with Price Levels
Defining Trend with Selected Price Patterns
Defining Trend with Selected Candlesticks

Chapter 3  Forecasting Trend with 10 & 40 Exponential Moving      Averages                                                
Moving Average Basics
10/40 Exponential Moving Averages Trend Signals
10/40 Exponential Moving Averages as Support/Resistance in Trending Markets
10/40 Exponential Moving Averages in Congesting Markets

Chapter 4  Price Targets with Bollinger Bands                                
Bollinger Bands Formulation
Applications in a Congestion
Applications in a Trending Market
Applications at the End of a Trend
Bollinger Bands Constraints

Chapter 5 Price Targets with Fibonacci Ratios                        
Fibonacci Basics
Retracement Projections
Expansion Projections
Tactical Issues in Fibonacci Technique

Chapter 6 Timing with Stochastics                        
Stochastics Structure
Stochastics Timing Signals in a Congestion
Stochastics Buy Timing in an Uptrend
Stochastics Sell Timing in a Downtrend
Why do Stochastics timing signals work in trends?
Stochastics Counter-trend Signals in a Trending Market

Chapter 7 Timing with Moving Average Convergence Divergence (MACD)       
MACD Formulation
MACD Trend Signal
MACD Divergence Signal
MACD Timing Signals
MACD & Stochastics Compared

Chapter 8 Integrating Trend, Timing & Price                
Integrating 10/40 EMA Change of trend with Price Action
Integrating 10/40 EMA Change of trend with MACD
Integrating 10/40 EMA with various indicators in resumption of trend
Integrating Price with Stochastics in a Strong Trend
Integrating Candlesticks with Bollinger Bands & Stochastics in a Congestion

Chapter 9 Time Frames Technique for Long Term Investment   

Defining Time Frame Technique
Benefits of Time Frame Technique
Time Frame Principles
4 Important Time Frame Relationships
Time Frame Guidelines   
Making the Most of Time Frames

Chapter 10 Managing Positions                        
Fear and Greed
Lower Price Stocks
Partial Exit
The "Crowded Trade"
Managing Long Term Positions 
On Following Recommendations
Your Own Portfolio of Preferred Stocks
An Investment Model that Suits You.

Concluding Remarks
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