Chapter 2 Bond-Stock Valuation Models—A Key Market Forecasting Tool
Stock market analysts have expended countless hours—as well as countless dollars—in the quest for market forecasting tools and indicators, to predict the direction of stock prices.
However, indicators often contradict each other, or involve parameters that have to be modified at frequent intervals to reflect changes in market behavior. For example, it was believed during the 1970s that the stock market would be very likely to turn into a major bear market during times when average dividend payouts for stocks, represented in indices such as the Standard & Poor’s 500 Index of major companies, declined to below 3.0%, or when price/earnings ratios (prices of shares divided ...
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