Stuart wrote last year on some of the challenges associated with relying solely upon the Shiller P/E as a measure of equity valuation. This debate has been widely covered and is somewhat moot at any rate, given that the US market is looking expensive relative to history… Read the article
Category: Value Investing
Yields, uncertainty and expected returns
As a completely agnostic investor in a risk-free government bond, a sensible return expectation might be the yield on that bond.
The yield is indeed what you receive if you hold a bond to maturity. Any shorter term gains in excess of that starting yield are… Read the article
How can you cyclically adjust when there is no cycle? The Shiller P/E and the US market
The Shiller price-to-earnings ratio (or ‘cyclically adjusted price-to-earnings ratio’) has become the poster child for bubble-hunters everywhere. Ever since Robert Shiller himself became associated with the dot.com boom and bust, investors have looked to the metric as an indicator of irrational exuberance in the markets.
So why is Shiller himself… Read the article
P-Hacking versus Skin in the Game: How can understanding incentive structures help us think about market efficiency?
While markets may have seemed uneventful of late, there has been a flurry of academic activity that gets to the very heart of whether it is possible to beat the market. Though dull and esoteric on the surface three papers and a new book, all released in the last three… Read the article
French election result
The election of Emmanuel Macron as President of France marks an important shift in the narrative around European politics: not all popular discontent in Europe can be channelled as anti-EU or purely nationalistic.
For investors, the importance of Macron’s victory may be more about what has been rejected… Read the article
What do changes to profits expectations tell us about equity returns?
Mid way through the announcement season, profits in the US, UK and Europe are coming in stronger than expected, and the momentum in analysts’ expectations has improved. The FTSE 100, buoyed by a pick-up in commodities and the currency impact post-Brexit has actually seen increases in analysts’ forecasts.
… Read the articlePolicy makers at a crossroads: the UK rate decisions and broader implications for asset prices
Though it may seem hard to believe, attention on policy makers has intensified. The market has delivered a vote of no confidence in the notion of negative interest rates and appears increasingly dissatisfied with the ability of monetary policy and QE to… Read the article
2016 and beyond: Whose regime is it anyway?
Our big issue to watch in 2016? Much the same as it was for 2015, and for a few years before that: what happens to the equity risk premium?
The equity risk premium is the apparent return you are offered for holding equities versus a ‘risk free’ asset*. With interest… Read the article
China Crisis? Yes, but no worse than two weeks ago.
The relationship between asset prices and fundamentals is complex. Evidence and intuition suggest that sometimes prices move for no real reason.
But even those of us who pay lip service to behavioural finance often find ourselves looking for explanations when we see the type of moves we have seen over… Read the article
Warren Buffett and Berkshire Hathaway
At the start of May, Tony Finding and Eric Lonergan made their annual ‘pilgrimage’ to Omaha in the US to attend the annual shareholder meeting for Berkshire Hathaway, the investment company run by Warren Buffet. In the second of two blog posts, Eric discusses his key takeaways from the experience.… Read the article