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OK, this is officially making my head spin. Let's simplify the calculation, and suppose you are holding equal values of 2 stocks, one with a PE of 10 and one with a PE of 20. Shouldn't your average PE be 15? That is what Paul's method produces.

DTM's method produces an average PE of 13. Why should the stock with the PE of 10 contribute more heavily to your "average PE" than the equal value of stock with a PE of 20?
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