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Finance: What is the Historical Trading Range? 18 Views


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Description:

What is the Historical Trading Range? The historical trading range is just the collection of prices a security has been trading at since its IPO in the case of stocks or since it was listed on an exchange, in broader terms.

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Transcript

00:00

Finance, a la shmoop. What is a historical trading range? All right you know how [The question written on a blackboard]

00:07

some Wall Street words are arcane, uh no arcane.. they say one thing but they mean [Pong being played]

00:14

something entirely different? Yeah well this is not one of those times.

00:18

Historical trading range, darn well you could say that AT&T has had a historical [AT&T tower]

00:23

trading range at a given price largely because well here's its stock chart for

00:27

the last umpteen years and you can see that it hasn't really moved sort of [AT&T showing a fairly consistent price over time]

00:31

lived between 30 and 40 bucks a share more or less forever it seems all the

00:35

investment gains to AT&T shareholders came through the company paying massive [Definition of dividend written on a 100 dollar bill]

00:39

dividends but historical ranges aren't just about stock prices alone like

00:44

here's the historical trading range of the price to earnings ratio of the S&P

00:49

500 so this chart shows the range of p/e multiples from 1880 to today ish and [Arrows showing the date range on the graph]

00:55

note that the lion's share of multiples lived in this band from about ten times [Lion's head appears]

00:59

to about 20 times and this was the range of multiples in yes there were outliers

01:04

like down here in the dumps after the economic hangover post-world War two [Man welding in a workshop]

01:08

repair work and then up here as well where earnings were actually very low

01:12

like one-time low so the price to earnings ratio was very high right like [Arrow pointing to the highest peak on the graph]

01:17

all the companies missed their numbers horribly went negative and stuff

01:20

all right like the company used to trade for 20 bucks a share and earned a dollar

01:24

well it might have had in that short period only a dime of earnings when

01:27

everything went bad and the world was ending but the stock went down 40 percent to [Picture of a city on fire]

01:31

12 bucks and on a dime of earnings while that 12 bucks seemed like a huge

01:35

multiple at 120 times but Wall Street knew the world wasn't ending and things

01:39

did come back and well here we are doing this video, so the short lived things get

01:42

tossed out and when you look at ranges you look at their history not just one [Bag labelled 2008 recession is chucked out the door of a house]

01:46

moment in time but decades in the past and you think about the ranges and what [Highlighted area on the graph going further back in time]

01:51

it implies in the future if anything and when in doubt yes you just sing Oh home

01:57

on the range, where the price to earnings ratio [Girl sat next to a fire with a guitar singing]

02:01

plays, or something like that historical trading range that's what it

02:05

is go check it out...

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