Research Update

We have updated our research website with the data from the 29th of March 2019. The most interesting results are summarized below.

Stock Market Valuation

Based on a universe of 6,500 companies, each month, we calculate fundamental valuation ratios for several countries and regions. 

  • Assuming a fair CAPE of 18.3 and a fair PB of 1.8, currently approximately half of all 40 stock markets trade below this fair value.
  • These undervalued markets represent only 21% of the worldwide market capitalization. Hence, undervaluations can particularly be found in smaller markets.
  • What is beneficial for active investors might penalize benchmark-oriented investors focusing on highly capitalized stock markets. Because not only the high valuation of large stock markets (esp. the US market) lower the expectations.
  • The history also shows that overweighting major economies has negative effects on the performance in the long run. Depending on the region, indices with equal weighted country allocations generated 0.9%-3.4% higher returns each year since 1969:


  • Interesting: In the last decade, traditional market-cap weighted indices performed better.
  • Reason: Larger markets tended to outperform since mid-2008. For example, the MSCI USA gained 150% while the MSCI World only rose by 80%. This fact burdened equal and GDP weighted country allocation schemes in the short run.


  • Ranking of regions based on CAPE: Eastern Europe undervalued, North America still expensive:
    • Eastern Europe: 9.2
    • Emerging Markets: 15.8
    • Asia (EM): 16.6
    • Historical CAPE average: 18.3
    • Europe (DM): 18.6
    • America (EM): 19.4
    • World: 23.5
    • Developed Markets: 24.8
    • United States: 29.9

  • Most attractive countries based on:
  • CAPE PB Dividend yield
    Russia (6.8) Greece (0.7) Russia (6.2%)
    Turkey (8.9) Russia (0.9) Czech (6.0%)
    Czech (10.3) South Korea (1.0) Finland (4.7%)

Interactive Map: Stock Market Valuation Ratios

Stock Market Expectations

We calculate the returns equity investors can expect over the next 10-15 years in several regions. The forecasts are based on the current CAPE and PB.

  • What kind of long-term returns can investors expect based on fundamental valuation (real)?
    • World AC: 5.6% p.a.
    • United States: 3.1% p.a.
    • Europe: 7.0% p.a.
    • Emerging Markets: 7.6% p.a.

  • Countries with highest expected returns: Russia (12.9%), Turkey (11.7%), South Korea (10.4%)
  • Countries with lowest expected returns: Denmark (3.0%), United States (3.1%), Ireland (3.8%)

Details: Stock Market Expectations

Value-Cycle

Based on the Fama and French HML-factors (High Minus Low), we calculate value premiums for the most important regions.

  • Longest period of losses in history: value stocks disappointed compared to growth stocks for years. This holds true for all major regions:

  • There are several reasons for this. On the one hand, not only the current underperformance, but also the previous outperformance until 2007 reached record levels, so that part of the drought is due to mean-reversion effects. On the other hand, value shares benefited from excessively high growth premiums. In other words, the high expectations of expensive growth stocks were generally not met, which resulted in disappointing price movements. However, the past decade, a different picture emerged: many growth stocks have even exceeded the expectations (see FAANG stocks), which boosted these stocks. Also, the general preference for stable and faster-growing business models as a result of the financial market crisis ("escape into bond-proxies") did not benefit the cyclical value stocks. The interest in Value has thereby dropped extremely, many value managers have relaxed their strategies now.
  • Deep-Value is characterized by three factors: attractive valuation, long-term disappointment and barely invested investors. For contrarian investors, these are no bad conditions for positive surprises.
  • Fama and French HML value premiums over the last 5 years for the most important regions:
    • Global: -3.6% p.a.
    • United States: -2.6% p.a.
    • Europe: -3.2% p.a.
    • Japan: -2.3% p.a.


StarCapital - Norbert Keimling

Contact Us

For queries or additional information please contact:


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