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December 2017

CAPE: Actual return forecasts and predictive accuracy in history


Which distribution of returns followed in history over 10-15 years in 17 countries from 1881-2015?

20%
For the actual valuation levels in these countries never negative
long-term subsequent returns were observed in global history. 17 Countries (1881-2015)

Historically, the current


US-CAPE of 30.3 was
followed by below
15% average returns
of 0.8-4.6% p.a. over
the next 10-15 years.
But keep spikes in mind:
In particular cases also
returns of -4.1% and
10.7% were realized.
10%
Russia
Returns of the subsequent 10-15 years

5%

Devel. Mkts, Switzerland


Canada, Sweden, India
Italy, Emerging Mkts

Hong Kong, China


0%
Spain, Singapore

Germany, France
Brazil

Netherlands
UK, Korea

World AC
Australia

Taiwan
Europe

Japan

US
Shiller-CAPE
-5%
5 10 15 20 25 30
This chart shows the relationship between CAPE and the returns of the subsequent 10-15 years for the periods 01/1881-05/2015 (S&P 500) and 12/1979-05/2015 (16 other MSCI Countries). Only CAPE levels between 5 and 30 are shown. Returns are adjusted for inflation, in local currency, incl. dividend
income and annualized. For details see research paper "Predicting Stock Market Returns Using the Shiller-CAPE: An Improvement Towards Traditional Value Indicators?"(http://www.starcapital.de/files/publikationen/Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling.pdf).
The current CAPE valuations for the 20 countries with the highest market-capitalization and the corresponding historical return distributions followed on comparable valuations are shown. Current CAPE as of 11/30/2017.

Contact: StarCapital eMail: info@starcapital.de


Norbert Keimling Aktiengesellschaft www.starcapital.de/research
Head of Research Kronberger Str. 45 freecall 0800 - 69419 - 00
Dr. Nora Imkeller 61440 Oberursel Tel.: +49 6171 69419 - 0
Analyst Germany Fax: +49 6171 69419 - 49