Research Update

We have updated our research website with the data from January 2020. 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. 

  • Ranking of regions based on Dividend Yield: Numerous Emerging Markets and European equities offer dividend yields above 3%:
    • Eastern Europe: 5.4%
    • Europe (DM): 3.3%
    • America (EM): 3.2%
    • Emerging Markets: 3.1%
    • Germany: 2.9%
    • Asia (DM): 2.8%
    • BRIC: 2.7%
    • World: 2.5%
    • Asia (EM): 2.4%
    • Developed Markets: 2.4%
    • United States: 1.7%

  • Over the past decades, global stock markets have been valued at an average Shiller CAPE of 18.3 and a PE of 1.8. Out of 40 stock markets, 17 are currently trading below these long-term averages and are therefore attractively valued, 13 are clearly overvalued and 10 show inconsistent valuations.
  • Most attractive countries based on:
  • CAPE PB PC Div. Yield
    Russia (7.8) Greece (0.9) Hungary (4.7) Russia (6.6%)
    Turkey (8.6) Korea (South) (1.0) Russia (4.8) Czech (6.0%)
    Czech (10.0) Russia (1.0) Italy (5.6) UK (4.4%)

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 returns can investors expect based on fundamental valuations over long-term periods of over 10 years (in real terms):
    • World AC: 5.4% p.a.
    • Europe: 6.7% p.a.
    • United States: 2.7% p.a.
    • Emerging Markets: 7.7% p.a.

  • Developed Countries with highest expected returns: Korea (South) (10.5%), Singapore (10.0%), Austria (9.0%)
  • Developed Countries with lowest expected returns: Denmark (2.5%), United States (2.7%), Ireland (3.4%)

  • The forecasts are based on historical CAPE and PB observations of approximately 140 years, whereby the returns in the past were widely spread around the illustrated means. The extent of this fluctuation and the uncertainty associated with the predictions can be seen in the following chart using the Shiller CAPE as an example:
  • This demonstrates that in 140 years of stock market history, attractive valuations such as those currently seen in Korea or Russia have never resulted in losses and usually generated significant above-average returns over the following 10-15 years.
  • In contrast, high valuations, such as those in the USA, were only followed by returns exceeding 5% in very few outlier periods; typically, significantly lower or negative returns were realized in the long-run.
  • In the last edition of our research update, we discussed which stock market returns at what probabilities can be expected in the next 15 years, using scenario analyses for the DAX 30 and S&P 500.

Details: Stock Market Expectations


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 applies not only to the US market, but to all major regions:
  • In the last year Value stocks underperformed Growth stocks by 12% globally and by 13% in Europe (MSCI), although this is hardly justified from a fundamental perspective. In fact, globally, in Europe and in the Emerging Markets, the EPS growth of Growth stocks was more than 4% lower compared to the Value segment in 2019.
  • The outperformance of Growth stocks in 2019 is thus entirely due to a valuation expansion, which has now reached historic highs in some regions such as Europe.
  • Since 1974, investors paid an average premium of 78% for Growth shares compared to Value shares. At the peak of the new economy bubble in spring 2000, investors briefly paid extreme premiums of 155%. At the end of January, this premium reached a new record level of 169% in the MSCI Europe!
  • Since valuations cannot widen endlessly, a long-term rebound is more than overdue.
  • Details and background can be found in our research paper The presumed end of the Value premium.
  • The Fama and French HML value premiums is deeply negative over the last year for the most important regions:
    • Global: -9.4% p.a.
    • United States: -8.8% p.a.
    • Europe: -9.1% p.a.
    • Japan: -10.2% p.a.

StarCapital - Norbert Keimling

Contact Us

For queries or additional information please contact:

Norbert Keimling
Head of StarCapital Research