After VAR Models Do's and Don'ts, A Zero Phase Shift Band Pass Filter, Asset Classes and Business Cycles, Estimating Liquidity Risk Premia and Why Private Markets, a sixth such presentation from 2014 analyzes how information in Price Earnings (PE) ratios can be used to forecasts equity returns.
It does so by providing a literature overview, a business cycle analysis of PE ratios and by back-testing equity return forecasts with and without the information from PE ratios. One important finding is that PE ratios do not seem to provide much additional information relative to the information obtained from the frequency domain methodology that powers our Economic Scenario Generator (ESG) model
With PE ratios on the rise for most of the time since 2010, also today it is very relevant to know what current PE levels can tell us about current expected equity returns. We are happy to share some of our learnings on PE ratios and expected returns with you.
Learn more about our Economic Scenario Generator (ESG) models.