If only the Yale prof would realize that if (a + b) is positively correlated with c, and b is negatively correlated with c, then a is highly positively correlated with c. Also that earnings don't live in a vacuum and the best estimate of next years earnings is last year's + 10% not the 10 year average. When the collab and I pointed out the errors in his thinking, he said it could be an Ito process where all such relations don't necessarily hold, but he realized the gaps in his ideas and they weren't very important to him. Of course the main thing is that the professor has been bearish since 1965 suffering from the English disease that the main determinant of stock prices moves and variabilities is the dividend distribution.

Andrew Goodwin writes: 

A dividend distribution factor as a key determinant of stock price moves seems misplaced given the case of closed end funds that distribute assets instead of solely income as dividends. More on this subject might be of interest.

I have not studied the subject deeply enough to share a view yet.


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