Studies

Which stock market returns can investors expect in the long-term? Which criteria should investors consider for the selection of investments? Does a combination of value and momentum factor strategies add value?

These are just some topics in our field of activity. Our capital market research refers to existing academic research and mostly analyses the long-term relationships on equity, country and sector levels from a behavioural finance perspective. The following studies provide selected insights in these topics.

Predicting Stock Market Returns Using the Shiller CAPE (January 2016)

Predicting Stock Market Returns Shiller CAPE PE - StarCapital - Keimling - Imkeller

Existing research indicates that it is possible to forecast potential long-term returns in the S&P 500 for periods of more than 10 years using the cyclically adjusted price-to-earnings ratio (CAPE). This paper concludes that this relationship has also existed internationally in 17 MSCI Country indexes since 1979. In addition, the paper also examines the forecasting ability of price-to-earnings, price-to-cash-flow and price-to-book ratio, as well as that of dividend yield and of CAPE adjusted for changes in payout ratios. The results indicate that only price-to-book ratio and CAPE enable reliable forecasts on subsequent returns and market risks. In countries with structural breaks, price-to-book ratio even exhibits some advantages compared to CAPE.

Complete study: Predicting Stock Market Returns Using the Shiller CAPE  (SSRN-version)
German version: Aktienmarktprognose: Das Shiller-Cape auf dem Prüfstand
Further information: Press release (German)

Value meets Momentum (September 2014)

Combining Value Momentum - StarCapital - Keimling - Imkeller

Numerous studies document that value-investors can earn a yearly 3% excess return over the benchmark. Our findings presented in this study furthermore suggest that this excess return can be enhanced by adding momentum-considerations into the investment decision. Investors choosing value stocks with a high price momentum could earn 1-5% higher yearly returns (depending on market and time frame) than by investing purely into value-stocks. The reason for this observation seems to be that investors considering high positive price-momentum in addition to a stock’s valuation improve their timing. In addition, the negative correlation between the value- and momentum-styles increases diversification and reduces portfolio volatility.

Complete study: Value meets Momentum
German version: Value trifft Momentum
German journal article: Phänomene des Marktes: Value trifft Momentum? (SmartInvestor, December 2014)
Related journal article: Momentum und Value kombiniert (Finanz und Wirtschaft, October 2015)

CAPE: Predicting Stock Market Returns (March 2014)

Shiller CAPE PE Stock Market Forecast - StarCapital - Keimling - Imkeller

Equity investments are subject to high volatility in the short to medium term and a crucial factor for the strategic return potential is the timing of new investments. The objective of this examination has been to answer the extent to which the timing of new exposures can be successfully chosen using the cyclical adjusted Shiller CAPE, and whether the indicator allows statements to be made on long-term equity market returns. The examination reaches the conclusion that it is possible to forecast relatively reliably the long-term equity market returns of 15 equity markets using a cyclical adjusted CAPE. The concept has demonstrated impressive results in the US market over the past 130 years and in 14 other equity markets in the period 1979-2013. It is fair to assume that this connection can also be found in other markets even if we are unable to empirically verify this theory for lack of available data.

Complete study: CAPE: Predicting Stock Market Returns (SSRN)
German version: Lassen sich Börsenkurse vorausberechnen?
German journal article: Wie es mit Aktien weitergeht? (FuW, 01/03/2017)
German journal article: Monetäres Harakiri belastet Renditeaussichten (NZZ, 12/01/2015)

Norbert Keimling: how to find attractive investment opportunities (November 2013)

Video - StarCapital - Keimling

Can losses be predicted in advance? In the past, stock market forecasts made by banks and analysts have given reason for doubt. However, there are significant relationships between value indicators such as price-to-book ratio and long-term stock market returns. Norbert Keimling explains in this webinar how StarCapital successfully identifies investment opportunities.

Link to the video (german): Den lukrativsten Aktienmärkten auf der Spur?

High growth rates involve danger... (June 2012)

Should investors select stocks based on the expected growth rate or rather rely on traditional fundamental indicators such as price-to-book ratio. This paper analyses this question and demonstrates the risk of predicted growth rates. We come to the result that growth stocks achieve below average returns, whereas attractive value stocks outperform the market by 3% p.a.

Link to the article (german): Hohes Wachstum birgt Gefahren...

It's not the end of the world - analysis of current situation (October 2008)

Determination - StarCapital - Keimling

Review of our 2008 market evaluation: "On the 10. October 2008, the Dow Jones experienced four major price changes of more than 600 points in opposite directions. In times of such a high volatility, it is questionable to which extend stock prices are driven by fundamentals. When fundamentals are meaningless and fear and greed take over control, new attractive investment opportunities emerge."

"Meanwhile, the financial crisis is on everyone's lips as it was in 2000, but this time people are driven by panic instead of euphoria. Right at the moment, it is impossible to say if we have already hit the bottom or not. However, long-term investments in value stocks during times of sell-offs have histroically turned out to be a good deal."

Link to the article (german): Die Welt geht nicht unter - Eine fundamentale Standortbestimmung

Chances for success of simple value strategies (November 2004)

The objective of this empirical work was to assess the chances for success of simple value strategies from a private and institutional investors point of view. For this purpose, we evaluated price-to-earnings, price-to-cash-flow, price-to-book and price-to-sales ratio as well as dividend yield of seven countires and the FTSE World Index in the period 1989-2003. The study comes to the conclusion that value stocks outperform growth stocks in the long-run and simple value strategies achieve higher returns that the respective index. As the empirical analysis shows for the FTSE World Index, value investor would have outperformed the market on a 13 year basis, almost independent of the investment criteria being looked at or the number of stocks in the portfolio.

Complete study (german): Die Erfolgsaussichten einfacher Value-Strategien

StarCapital - Keimling

Contact Us

For queries or additional information please contact:


Norbert Keimling
Head of StarCapital Research
info(at)starcapital.de