Stocks for the Long Run : the Definitive Guide to Financial Market Returns and Long-term Investment Strategies

CHAPTER 9 Outperforming the Market 151

FIGURE 9–4

P-E Ratios for the S&P 500 Index Companies, 1957 through December 2006

TABLE 9–4

Returns on the S&P 500 Stocks Sorted by P-E Ratios

P-E Ratio Beta Excess Return

over CAPM

Geometric

Return

Arithmetic

Return

Standard

Deviation

Lowest

Low

Middle

High

Highest

S&P 500

14.30%

13.52%

11.11%

10.04%

8.90%

11.13%

15.35%

13.52%

11.11%

10.04%

8.90%

12.39%

15.50%

15.79%

14.59%

14.95%

18.84%

16.52%

0.6347

0.6067

0.6230

0.7077

0.8546

1.0000

5.51%

4.99%

2.30%

0.70%

-0.78%

0.00%