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ArturoP, as John said, instead of minimizing EV/EBIT, you could as well maximize the inverse ratio EBIT/EV, thus eliminating the division by 0. You could think of the ratio (e.g. EBIT/EV) as a utility function, i.e. how well you evaluate a company based on the 2 variables, such as U(EBIT,EV) = EBIT/EV. You'll notice that the ratio above works well when ...


Sure, the variance of the total wealth can be expressed in terms of the variances and covariances of the prices of the assets. If $$ W = \sum_{i} \pi_i P_i $$ where $\pi_i$ is the total dollar amount invested in asset $i$ with price $P_i$. The variance of total wealth is then $$ Var(W) = \sum_i \pi_i Var(P_i) + \sum_i \sum_{j, j\neq i} \pi_i \pi_j Cov(P_i, ...

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