Typically written as P(E|H) in Bayes’s theorem, it measures the degree to which hypothesis H predicts or explains the evidence E. It is sometimes referred to as the “explanatory power” of H with respect to E.
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Explanatory Synthesis
The go-to metric for nearly all investors when it comes to valuing a stock has to be the P/E ratio. Standing for price-to-earnings, this formula is calculated by dividing the stock price by the earnings per share (EPS). The lower the P/E ratio, the more earnings power investors are buying with ea...
Unfortunately, there's no P/E ratio set in stone that makes a stock a buy if it's below, or a sell if it's above.
Often value investors and growth investors will look for different things in a P/E ratio.
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