Is Valuation Meaningless?
from the how-to-misread-studies dept
It seems you don't really need to understand finance to make fun of a finance study these days. Over at Red Herring they're wondering about a study saying that valuation is basically meaningless in predicting stock performance. Of course, they appear to look at aggregate data, which is absolutely useless in a situation like this. Especially following the collapse of the bubble when valuations were completely out of whack, looking at aggregate valuation data is going to tell you absolutely nothing. Anyway, valuation, by itself, shouldn't tell you much about stock performance anyway. Valuation is a "snapshot" - it tells you simply what the stock is valued at right now. It doesn't have any predictive value whatsoever, by itself. In combination with plenty of other information it can be useful in making judgments on a company - but, by itself, it's simply not a predictive number.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
