Professional money managers use various tools to measure the value of an investment. One common measure is the Price/Earnings ratio. To get a P/E ratio, take the price of a stock and divide it by its earnings. We will use Facebook. The closing price for FB (its ticker symbol) on Friday was $172.45 and its […]
The US stock market, as measured by the Dow Jones Industrial average, has now experienced six consecutive days of losses. This has not happened since 2011. The markets may be questioning whether the new administration will be able to execute on plans that include tax reform, reduced governmental regulation, better trade arrangements and fiscal stimulus. […]
The Big Mac index was invented by the British news magazine The Economist in 1986 as a half-serious guide to whether currencies are at their “correct” level. It’s based on the theory of purchasing power parity (or PPP), which is the idea that in the long run, exchange rates should move toward the rate that […]
This is Springwater’s Source, a topic or issue in personal finance and investing, shared visually. The Source will share one concept, once a month, in about a minute or less. Educated investors understand that there is a benefit to diversification. Setting aside grandma’s warning to not put “all your eggs in one basket”, there are […]
This is Springwater’s Source – a topic or issue in personal finance and investing, shared visually. The Source will share one concept, once a month, in about a minute or less. An important concept derived from financial economics is that of a “risk premium”. In a nutshell, this premium is what investors can expect to […]
Economists have been studying the so-called “gender” gap – defined as systematic differences in the outcomes that men and women achieve in the labor market – for over 100 years. These differences are seen in the percentages of men and women in the labor force, the types of occupations they choose, and their relative incomes […]
Every three years, the Federal Reserve’s Survey of Consumer Finances interviews thousands of American families (6,026 for the newly published 2013 edition) about their income, savings, investments and debts. It is some of the richest information available about Americans’ financial lives, particularly in the 2010-13 recovery from the 2007-09 Great Recession. The results are quite […]
In this Business Insider video interview from 2008, Professor Ken French of Dartmouth discusses why owning commodities doesn’t make sense for most investors.
Professor Eugene Fama of the University of Chicago was awarded the 2013 Nobel Prize for economics. In this video, Professor Fama – a director of Dimensional Fund Advisors – discusses his ground-breaking work in the field of financial economics.
With Congress’s latest effort to address America’s economic and budgetary challenges behind us, and with a brief lull before their antics begin again in the winter of 2013/14, we thought it would be an opportune time to revisit the New York Times’s 2010 budget deficit puzzle. You can set your budget priorities – and try […]