CFA Practice Question

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CFA Practice Question

The percentage change in stock market value is the sum of the percentage change in GDP, the share of earnings in GDP and the P/E ratio. In the long run, which factor must dominate? The percentage change in:

A. GDP itself.
B. the share of earnings in GDP.
C. the P/E ratio.
Correct Answer: A

The other two factors cannot rise or decline forever.

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