Research Update

We have updated our research website with the data from the 28th of September 2018. The most interesting results are summarized below.

Research in Charts

Dangerous Market Timing

  • In the past 100 years, investors only earned 1-2%, annually, by investing in government bonds, gold or real estate. Government bonds defaulted or declined for 50 years and more; in times of crisis, real estate and precious metals were exposed to extreme tax burden and sanctions. Stocks might fluctuate heavily in the short term, but generated an inflation-adjusted annual average return of 7% in the long run and returned profits after no more than 20 years. Hence, stocks not only offer the highest yields but also the lowest risk.
  • In spite of devastating financial crises, this is still true for the previous decade: during 2007-2017, stocks outperformed gold, bonds and cash by 59%, 65% and 102%, respectively (US).
  • Nevertheless, German insurance companies' stock exposure was as low as 3-5% for a long time despite of low interest rates and high stock market gains. Furthermore, they turn out to be lousy market timer: having held the highest equity exposure in 2000 – just before the New Economy bubble burst. Unfavorable sales on low price levels resulted in portfolios which still suffer from losses of two stock market corrections whereas the DAX 30 Index rapidly recovered from these losses and reached new all-time highs.
  • Conclusion: Not financial crises but pro-cyclical regulation and poor market timing result in permanent wealth losses.

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 PB: Emerging Markets and Japan attractive, Europe and Asia neutral, North America expensive:
    • Eastern Europe: 1.0
    • Japan: 1.4
    • Emerging Markets: 1.7
    • Europe (DM): 1.8
    • Asia (EM): 1.9
    • America (EM): 1.9
    • World: 2.1
    • Developed Markets: 2.2
    • United States: 3.4

  • The country based situation is not consistent: 19 out of 40 countries trade below and 21 countries trade above Fair Value. Apart from Eastern Europe, Asian markets offer the highest discounts to Fair Value.
  • Most attractive countries based on:
CAPE PB Dividend yield
Russia (6.8) Greece (0.6) Czech (5.9%)
Turkey (9.2) China (0.9) Russia (5.5%)
Czech (10.2) Russia (0.9) Australia (4.3%)


  • Momentum is neutral: 20 out of 40 stock markets are above and 20 are below their 26-week averages. Relation for the 52-week averages: 21 to 19.

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 long-term returns can investors expect based on fundamental valuation (real)?
    • World AC: 5.3% p.a.
    • United States: 2.7% p.a.
    • Europe: 6.7% p.a.
    • Emerging Markets: 7.6% p.a.

  • Countries with highest expected returns: Russia (12.7%), Turkey (10.9%), China (9.8%)
  • Countries with lowest expected returns: United States (2.7%), Denmark (2.9%), Ireland (3.9%)

Details: Stock Market Expectations


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 5 years are negative for the most important regions:
    • Global: -3.1% p.a.
    • United States: -3.2% p.a.
    • Europe: -2.3% p.a.
    • Japan: -2.1% p.a.

Interactive: Value Cycle

StarCapital - Norbert Keimling

Contact Us

For queries or additional information please contact:

Norbert Keimling
Head of StarCapital Research