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2020 | OriginalPaper | Buchkapitel

2. Is the Current US Stock Market Overvalued? Univariate Analysis

verfasst von : Lingjie Ma

Erschienen in: Quantitative Investing

Verlag: Springer International Publishing

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Abstract

In this chapter, we employ univariate analysis to evaluate the US stock market. Using the S&P 500 daily pricing data from 1950 to 2018, we illustrate the concepts of four moments, density and cumulative distribution functions, and hypothesis testing. We present two important figures: Benjamin Graham on investment and Student (William Sealy Gosset) on univariate analysis. We show nonnormality of asset returns and present an industry approach to outliers. In the last section, we introduce R and demonstrate simple calculations and plots.

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Vorheriges Kapitel Introduction

Nächstes Kapitel What Is the Relationship Between the Chinese and US Stock Markets? Bivariate Analysis

The National Bureau of Economic Research has classified common stocks as a leading indicator of business cycles.

Photo source: Equim43, http://mejorbroker.org.

This all sounded familiar in the 2000s when house buyers could purchase a home with 0% down, and house prices increased by about 20% every year before the financial crisis. History does repeat itself!

Source: Robert Shiller and his book Irrational Exuberance for historical S&P 500 P/E ratios.

The government bought bad assets from companies by pumping new money into the economy and market.

Normal distribution is also called Gaussian because it was discovered by Carl Friedrich Gauss.

More evidence is provided for public equity markets in other countries and other asset classes.

This is analogous to a mail carrier delivering mail to an address.

A cusip has 9 digits. It provides a unique identification for all stocks and registered bonds in the USA and Canada.

Graham, B. 1949. The Intelligent Investor. New York: Harper & Row.

Graham, B., and D. Dodd. 1934. Security Analysis. New York: Whittlesey House, McGraw-Hill Book.

Student. 1908. “The Probable Error of a Mean.” Biometrika 6(1): 1–25.CrossRef

Titel: Is the Current US Stock Market Overvalued? Univariate Analysis
verfasst von: Lingjie Ma
Verlag: Springer International Publishing
Buch: Quantitative Investing
Print ISBN: 978-3-030-47201-6

Electronic ISBN: 978-3-030-47202-3

Copyright-Jahr: 2020
DOI: https://doi.org/10.1007/978-3-030-47202-3_2