RealClearMarkets - Articles - The Wisdom of Crowds, Year Two: "The Wisdom of Crowds, Year Two
By John Tamny
Not satisfied with traditional measures of stock valuation, University of Chicago business-school graduates Rafael Resendes and Daniel Obrycki founded the Applied Finance Group (AFG – note that the author of this piece serves as an economic advisor to AFG’s mutual fund arm, Toreador Research & Trading) in 1995. Resendes and Obrycki created models showing among other things why earnings do not reflect a company's profits, why P/E ratios are poor proxies for company value, and why sales growth is not a leading indicator when it comes to rising stock prices.
Their research led them to what they call an Economic Margin Framework, which corrects the various distortions and flaws that reveal themselves with traditional 'As Reported' accounting figures. Incorporating the widely accepted economic principle that competition gradually erodes excess returns over time, Resendes and Obrycki built a market-outperforming valuation metric that has attracted over 175 institutional clients managing over $350 billion in U.S. equities alone from around the world."
-
No comments:
Post a Comment