On the predictive power of CAPE or Shiller’s PE ratio: the case of the Greek stock market

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On the predictive power of CAPE or Shiller’s PE ratio: the case of the Greek stock market

Kenourgios, D. Papathanasiou, S. Bampili, A.C.

scientific_publication_article
Επιστημονική δημοσίευση - Άρθρο Περιοδικού (EL)
Scientific publication - Journal Article (EN)

2021


This paper examines the capability of the Cyclically Adjusted Price to Earnings (CAPE) or Shiller’s P/E ratio, along with other relative valuation ratios such as the P/E and the P/BV, to predict future returns of the FTSE/ASE Large Cap Index, starting from the development of the index (1997) to December 2018. We have herein used several regression models in order to examine the relationship between the above ratios and the future returns of 1, 3, 5 and 10 years. We show that, while P/E and P/BV ratios are not correlated to future returns, the CAPE ratio and its variation CAPE 5, which uses real 5 year earnings, are efficient estimators of future returns. Our results imply the informational inefficiency of the Greek Stock Market. © 2021, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature. (EN)

English

Ερευνητικό υλικό ΕΚΠΑ

https://creativecommons.org/licenses/by-nc/4.0/




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