Why is this reasoning suspect

Reference no: EM131487802

Question: The earnings-to-price ratio for the S&P 500 stocks declined significantly from the late 1970s to the late 1990s. As this ratio is a "return" per dollar of price, some claimed that the decline indicated that the required return for equity investing had declined, and they attributed the increase in stock prices over the period to the decline in the required return. Why is this reasoning suspect?

Reference no: EM131487802

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