I will be recreating some posts from the old version of my website. I want to make sure that I post a link to the paper by Pu Shen from 2000 called The P/E Ratio & Stock Market Performance. This paper was very prescient, arguing that high P/E ratios lead to below average Equity Market performance over the following periods.
Furthermore, negative equity market returns (one month forward) were expected when there was a negative spread between the Earnings Yield and the 3 month T-Bill yield - as was the case at publication date.
This paper was incredibly influential to my further research into the question of how to simulate expected returns in the equity markets AND on when to reallocate money from stocks into bonds and vice-versa.
Kevin Spires, CFA, FRM
Furthermore, negative equity market returns (one month forward) were expected when there was a negative spread between the Earnings Yield and the 3 month T-Bill yield - as was the case at publication date.
This paper was incredibly influential to my further research into the question of how to simulate expected returns in the equity markets AND on when to reallocate money from stocks into bonds and vice-versa.
Kevin Spires, CFA, FRM
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