Research Update

We have updated our research website with the data from the 30th of November 2018. The most interesting results are summarized below.

Research in Charts

How attractive are stock markets after the recent setbacks in 2018?

  • Equity investors have experienced losses in almost all countries in the year 2018. 34 out of 40 countries had a negative 52-week momentum at the end of the year (in euros).
  • Overvaluations in numerous countries have diminished with the price declines.
  • According to our research, equities are fair valued at a CAPE of 18 and a price/book ratio of 1.8.
  • While at the beginning of 2018 18 countries were still listed above their fair value and 14 countries below it, currently only 7 countries appear to be overvalued while 18 countries are undervalued both according to CAPE and PB.
  • The following animation shows how much the valuation became more attractive in 2018:

  • As usual, the setbacks on the stock markets have come as a surprise. At the end of 2017, the most well-known financial institutions forecasted on average a DAX level of 14,009 points for the end of 2018. The recent DAX closing level of 10,559 points thus indicates that analysts’ expectations have been off by 27%.
  • Since the year 2000, analysts forecasts have been repeatedly too optimistic and thus have not correctly predicted a market correction at any point in time. On average analyst forecasts have missed their own expectations by 18%.
  • Noteworthy: Any Investor who would have forecasted a constant DAX performance of 7-16% since 2000 would have predicted the DAX just as well as the sophisticated analysts' estimates.


Stock Market Valuation

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

  • Ranking of regions based on CAPE: Emerging Markets, Europe and Asia undervalued, North America still expensive:
    • Eastern Europe: 8.7
    • Emerging Markets: 14.5
    • Asia (EM): 15.1
    • Europe (DM): 16.5
    • America (EM): 18.1
    • Global CAPE Average: 18.3
    • World: 21.1
    • Developed Markets: 22.2
    • United States: 26.8

  • Most attractive countries based on:
  • CAPE PB Dividend yield
    Russia (6.4) Greece (0.6) Czech (6.4%)
    Turkey (7.8) China (0.8) Russia (6.3%)
    Czech (9.6) Russia (0.9) Portugal (5.1%)

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: 6.3% p.a.
    • United States: 3.9% p.a.
    • Europe: 7.7% p.a.
    • Emerging Markets: 8.1% p.a.

  • Countries with highest expected returns: Russia (13.2%), Turkey (11.6%), South Korea (10.7%)
  • Countries with lowest expected returns: Denmark (3.6%), United States (3.9%), Ireland (4.7%)
  • The following world map highlights the long-term equity market potential for the 20 largest economies:


  • The following illustration visualizes the probability distribution of CAPE-based return estimates:
  • Over the past decades, for example, a CAPE of 16.4 - as we currently see it in Germany - has usually resulted in long-term value increases of 5-9% annually. However, in a few outlier years, value increases of 0-14% were also observed:

Details: Stockmarketpotential

Value-Cycle

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

  • Fama and French HML value premiums over the last 3 years for the most important regions:
    • Global: -1.2% p.a.
    • United States: -0.2% p.a.
    • Europe: +1.7% p.a.
    • Japan: -2.5% p.a.

Interactive: Value Cycle

StarCapital - Norbert Keimling

Contact Us

For queries or additional information please contact:


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