In a similar vein to an earlier passage regarding Domestic vs. International Valuation and subsequent total return, here is a look at the likes of Domestic vs. Emerging. This is a basic way to form an asset allocation decision. It asks the question, "Based on the current difference in valuation vs. history, how should the …
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From the most elementary standpoint, an equity risk premium is the amount of extra expected return you receive for taking on risk in equities vs a risk-less bond. As I have found EV / EBITDA to be more useful than the standard P / E Ratio, I have decided to include that into these calculations. …
When deciding whether to overweight US vs overseas equities, looking to PE ratios are helpful. The S&P 500 trades at about 23 times earnings while the MSCI All Country World ex-US Index trades cheaper at about 19. This, on the surface, would give you motivation to ship your dollars across borders for greener pastures. While …
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There can be a good deal to gather from the spread on sound corporate bonds vs. a riskless treasury. Currently at 1.26%, with the treasury at 2.32% we find that the yield on these bonds is obviously 3.58. Now here is where the indicator comes in: If you flip the yield, you now have a …
Continue reading Valuation Series Vol. 2: Corporate Bond Yield PE Proxy
The Price to Earnings, or PE, ratio is used to guage how much investors are willing to pay for each dollar of earnings a company, or group of companies, earn. It's easiest to think of this as a unit price at a grocery store. One fail-safe for using this metric to view a company before …
