low P/E approach to, 160-63, 164,

166, 167, 173, 174-78, 179, 181,

184, 186, 187, 188, 189 performance of, 85-87, 143, 146, 149,

160, 163, 164, 166, 169, 171,

186-92, 303,374, 399-404 price-to-book value ratio (P/BV) for,

163-67, 173, 174, 179, 181,

182-83, 184, 186, 187, 188 price-to-cash flow ratio (P/CF) for,

163-67, 173, 174, 178-82, 186,

187, 188 price-to-dividend ratio (P/D) for,

167-69, 173, 179, 183-85, 188 probabilities and, 187-92 reconstruction of, 253-55 for retirement, 161, 187 retum on, 62, 159, 161-65, 186-92,

211-12, 278,400-401 risk and, 170

rules for, 165, 167, 169-70, 171 security analysis for, 170-71 sell discipline for, 160, 210-13 semivariance and, 303 strategies for, 160-69 taxes and, 23, 169, 186 total value of, 312 transaction costs and, 166, 168, 186 tumover of, 59, 167, 186 value investing and, 164, 175, 178, 191 Prechter, Bob, 56

precious metals, 241-42, 247, 280-83,

288, 291,294,315 Presley, Elvis, 70 Presstek, 239

prices, consumer, 53, 142, 223, 287-90,

294 prices, stock: current, 233

determination of 17, 34, 46, 59-60,

228, 354, 359 differentials in, 129-30, 134-35, 161 eamings and, 88, 93, 94, 101, 108,

117-36, 385-94 fraud and, 336-37 movements of, 46, 62, 64, 92, 263,

385-91,393,395,404 premium, 101

probabilities and, 27-30, 40-41, 46 stock splits and, 385-89, 393 value vs., 49, 230-31, 393-94, 446n volume and, 42 price-to-book value ratio (P/BV);

in contrarian strategy, 52-53, 140, 141, 151, 152-57, 158, 239, 296,434/1

crisis invesling and. 266-67, 271, 272,

273, 274, 276 in eamings surprises, 118. 119, 120.

123, 124-25. 126/1, 132-33. 135 for industries, 194-203, 211 investor overreaction and, 248-35 for portfolios, 163-67, 173, 174. 179,

181, 182-83, 184, 186. 187. 188 of small capitalization stock.s. 327.

331-32

price-to-cash flow ratio (P/CF): in contrarian strategy, 140, 141.

154-57, 158, 296,434/j crisis investing and, 276 in eamings su rises, 118, 119, 120,

121, 123, 124-27, 129-30, 132,

for industries, 194-203

investor overreaction and, 248-55

for portfolios, 163-67, 173, 174,

178-82, 186, 187,188 of small capitalization stocks, 331 price-to-dividend ratio (P/D):

in contrarian strategy, 140, 141, 154,

155, 156, 157, 158 for industries, 194-203 investor overreaction and, 248-55 for portfolios, 167-69, 173, 179,

183-85, 188 of small capitalization stocks, 327,

price-to-eamings ratio (P/E), 140-58 analysis of, 52, 54, 55-56, 140, 141,

146-49, 153 contrarian strategy for, 140-58,

160-67, 173-81, 184-89, 194-203 crisis investing and, 268, 271, 272-74.

in eamings su rises, 117-36, 140, 245-46

for foreign investment, 207, 208, 209, 240

high, 240, 330, 332, 432n-33n investor overreaction and, 248-55 low, 17, 18, 36, 53, 146-67, 173-81,

184-89, 193, 194-203,211-13,

296, 317-18, 324-25, 329-33, 343,

398, 432n, 434n, 435/t multiples of, 122-23, 207, 212, 213.

252, 272, 365, 43In retums and, 145-49, 150, 153-37 risk and, 145-49, 151, 153 visibility and, 141, 142-45 probabilities, 30, 34-39, 187-92, 266,

probabilities (cont.) distribution of, 257 forecasts and, 80-81, 82, 111-14 investment errors and, 215-16,

218-19, 222, 224-26, 232, 236 investor psychology and, 30, 37-39 money managers and, 33-34, 113 normative, 225 portfolios and, 187-92 prior, 224-26, 236 risk and, 307-15

stock prices and, 27-30, 40-41, 46 Procter & Gamble, 209 products, 54, 78-79, 142 profits:

corporate, 50, 51, 256-57, 278

indicators of, 139, 248-55

instant, 354, 359, 370, 372

margin of, 77, 141, 142, 176, 199, 248-55, 256

near-term, 77, 78

taxation of, 51, 324 Prozac, 176-77 Prudential Securities, 105, 106 "prudent man rule," 304 psychiatric patients, 75-76, 77, 83 psychologists, clinical, 75-76, 77, 80, 81,

82, 83,429n psychology, investor, 347-72

analysis of, 18-22, 38, 347-72

"bubbles" and, 265-69, 348-72, 393

contrarian strategy and, 18-19, 158-59, 397-98

crowd psychology and, 348, 354-61, 362, 372

eamings su rises and, 118, 135, 136,

139, 245-46, 247, 251 efficient market hypothesis and, 35,

36, 150, 248, 347-48, 352, 364,

370, 372, 375-77, 379, 393-94 expert opinion and, 358, 366, 367,

368, 370-71 group opinion and, 359-61, 370-72 industries and, 193, 199, 200, 203,

210,213 ITOs and, 362-72

irrational behavior and, 348, 351, 356,

362, 369-72 panics and, 22-23, 217, 257, 265-66,

267,269-71,303 perceptions and, 359-61, 370-71 portfolios and, 169, 191-92, 213 price rises and, 354, 359 probabilities and, 30, 37-39 social reality and, 214, 357-59, 361,

speculation and, 354, 365, 366,

368-69 uncertainty and, 360, 361 value standards and, 352, 354, 355,

356, 364 see also overreaction, investor Psychology and the Stock Market (Dreman), 24, 39, 146, 369, 398 Pullerston, William ., 68 purchasing power, 281, 282, 287n,

288-89,294, 297, 304,311 Pure Software, 366-67 Putnam, Samuel, 304

QuaranteUi, Enrico, 269, 270 quintiles, 119, 143,202-3

Rand Corporation, 115

Random Walk Down Wall Street, A

(Malkiel), 31 Raskob, John Jacob, 284 Raymond James, 104-5 real estate, 181-83, 184, 295, 304, 315,

340, 351-54, 357, 358, 369n. 370 bank investments in, 265, 266-7,

269, 440n

real estate investment trusts (REITs), 340 recessions, 72, 73, 96, 97-99, 179, 219, 288

regression to the mean, 227-30, 235,

256-57,439n Reichman Brothers, 353 reinforcing events, 130, 132-34, 135,

Reinganum, Marc, 317, 318, 325,

328-29, 331,333 Renoir, Pierre-Auguste, 70, 242 representativeness heuristic, 216-21, 222 Resolution Trust, 353 retirement funds, 161, 187, 294-95, 310,

323, 327 retum:

above-market, 386-89

annual, 41, 146-47, 149, 228-29, 281,

290-91

average, 227-30, 234, 235, 256-57 on bonds, 228, 244, 278, 280-96, 305-15

capital gains as, 146, 195, 196 comparison of, 279-96 compounded rates of, 146-47, 187,

308-9, 329 on crisis investing, 261, 263-64, 278 on equity (ROE), 51, 176, 248-55,

inflation and, 280-90, 291, 292, 295

long-term rate of, 122, 228-30, 236, 279-96

on portfolios, 62, 159, 161-65,

186-92, 211-12, 278,400-401 price-to-eamings ratio (P/E) and,

145-49, 150, 153-57 risk and, 279, 298-302 on small capitalization stocks, 23,

325-33, 335-36, 339 taxation and, 284, 290-92, 295 value-weighted, 325-27 Reynolds, Burt, 69-70 risk, 297-315

academic research on, 300-303,

309-10

assessment of, 22-23, 62-63, 170,

399-404 avoidance of, 303-4 beta for, 145, 151, 153, 297-301, 352,

381,383, 395, 396,400-401,

442n

of bonds vs. stocks, 305-15 contrarian strategy and, 145-49, 151,

153, 268-69, 275-78 definition of, 49, 296, 297-303,

310-11,314-15, 376-77, 399-404,

424n

efficient market hypothesis (EMH) and, 145-49, 151, 153, 297-303, 382, 383, 384, 395, 396

inflation and, 297, 305-15

management of, 268-69, 275-78, 298, 299

modem portfolio theory (MPT) and, 399-404

nonsystematic (diversifiable), 4 optimal, 400-401 price-to-eamings ratio (P/E) and,

145-49, 151, 153 probabilities and, 307-15 rationality and, 298, 376-77, 399-

retums and, 279, 298-302 as semivariance, 303 of small capitahzation stocks, 323, 330, 335

spreading of, 170, 268-69, 275-78 systematic (market), 400 taxation and, 297, 305-15 as volatility, 297-303, 376, 399-401, 403

Ritter, J., 326, 363, 364, 369 Robertson Stephens, 364, 367, 398 Roll, Richard, 386 Rosenberg, Barr, 151,299 Rotnem, Ralph A., 381

rules, contrarian investment, 405-10 on average rate of return, 256-57 on "base rate" vs. "case rate." 236, 237 for "best" vs. "worst" stocks, 129.

136, 139-40, 158 on crisis investing, 262, 275 for economic conditions, 104 for forecasts, 96, 102, 124, 136 on immediate success, 231 for industries, 197,211 for information processing, 83, 87 for investment errors, 221, 224,

229-30, 231,236-37 on investment similarities, 221 on investor overreaction, 256-57 on long-term returns, 229-30, 236 for market timing and technical analysis, 47

for negative and positive su rises,

129, 136 for overconfidence, 99, 115 for portfolios, 165, 167, 169-70, 171 on prior probabilities, 236 as safeguards, 21-22 on short-term records, 224, 236 for small capitalization stocks, 331,

on visibility, 257 Russell 2000, 63, 327, 333

sales, 51,78,141,246,248-55 sales force, 88-89, 104-5 Salomon Brothers, 89, 106 Samuels, William, 361 Samuelson, Paul, 37, 377, 378, 379 Santayana, George, 373, 374 Saunders, Edward, 394-95 savings, 17, 49, 67-68, 285, 310 savings and loan industry, 51, 182, 244,

265, 289, 351,353, 354 Schmidt, Helmut, 240 Scholes, Myron, 35, 317, 327, 376,

Scudder New Europe, 210

Securities and Exchange Commission (SEC), 32, 334-35, 336, 337, .342. 343, 353, 370, 389, 390

security analysis, see fundamental analysis

Security Analysis (Graham and Dodd),

49-56, 256, 305-6 Security Data Company, 244 semivariance, 303 Seyhun, H, Nejat, 363 Shaffer, Richard, 369 Shakespeare, William, 70