The Warren Buffett Way Workbook by Robert G. Hagstrom & Russell Rhoads

Author:Robert G. Hagstrom & Russell Rhoads
Language: eng
Format: mobi, epub
Publisher: Wiley
Published: 2013-09-13T00:00:00+00:00

15. What is John Burr Williams’s classic definition of value?

In his book The Theory of Investment Value, Williams stated that the value of any investment is the discounted present value of its future cash flow.

16. What two assumptions about the stock market accompany Graham’s method of selecting stocks?

Graham believed the market frequently mispriced stocks due to the human emotions of fear and greed. At the height of optimism greed moves stocks beyond their intrinsic value. At times of fear stock prices will move below their intrinsic value. Also, he operated under the assumption that stock valuations will revert to the mean over time. Graham believed that an investor could profit from the corrective forces of an inefficient market.

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