By Rob Arnott, Bradford Cornell, Forrest Henslee, Thomas Verghese March 2025 Key Points Big market delusions (BMD) develop when investors anticipate that most early entrants in an exciting new market/technology will generate outsized returns. The recent electric vehicle (EV) craze demonstrates BMDs’ three-stage…
The implied equity risk premium (IERP) and theories of stock market bubbles both offer explanations for the current elevated level of stock prices, but they are strange bedfellows. Here we explore the relation between the two, starting with the implied…
Aswath Damodaran writes about what he calls the corporate life cycle.[1] He illustrates the life cycle with the graphic as shown below. From a valuation perspective, Damodaran’s corporate life cycle can be broken down as follows. In the first part,…
With stock prices at near record highs relative to measures like earnings or cash flow, many leading analysts have predicted meager returns over the next decade. Some have even suggested the return on the S&P 500 could be negative over…
Science advances one funeral at time – Max Planck The same can be said of the equity risk premium. Using fundamental valuation analysis to assess the level of the stock market, as measured for instance by the S&P 500 index, requires…
Updated March, 6th 2024In this article, we assume that AI, which we recognize has many different forms, will be a major economic success in that it will lead to greater productivity and rising GDP in the United States. The question…
By Bradford CornellIntroduction This paper provides simple intuitive explanations for three interrelated concepts that have provocative, implications for investment management: data mining, non-stationarity, and information entropy. The first two have been extensively analyzed in the…
Americans now hold over $1 trillion in cryptocurrencies. Has $1 trillion in wealth been created? From the standpoint of economic theory, the answers is no. The wealth of a society consists of its real assets that produce consumable goods and…
By Bradford Cornell, Shaun Cornell, Andrew Cornell Introduction An investor would have to have been living under a rock not to have noticed the appreciation in the value of automobile companies in the last two years. Tesla, of course, is…
By Bradford Cornell, Rob Arnott, Lillian Wu If a capitalist had been present at Kitty Hawk back in the early 1900s, he should’ve shot down Orville Wright; he would have saved his progeny money. …