Figuring out the right answer: Busting some popular myths about investing

The first step in figuring out the right answer to a problem is to eliminate all the clearly wrong ones. In finance, many of the wrong answers are provided, and even gain popularity, because of ignorance of theory and empirical research (for brevity, we shall use the word ‘theory’). Practitioners in every field of finance often make misleading claims that contradict theory. For example, listed companies try to talk up their share prices by making irrelevant announcements, such as bonus issue. Equity research analysts argue that a stock is cheap by using meaningless valuation multiples like Enterprise Value to Earnings