A Statistically Well-Behaved Transformation of P/E for Growth–Value Inference
Why inference on P/E fails for a classical testing method — and what changes when we test valuation on a stable scale or use a non-parametric test.
Abstract: This note examines whether large cap growth and value portfolios differ in valuation when measured using the conventional P/E ratio versus a modified statistic that is always defined and statistically well-behaved. The two portfolios are constructed from the top 25 constituents of VOOG and VOOV, respectively. The analysis presented here involv…
