Friday, December 6, 2013

Building a Trading Model with the 10 Year CAPE?

I was reading a Blackrock post today about market valuations, and I link hopped all around the world today, mainly because of the mention about CAPE, or the Shiller P/E ratio.

With that in mind, I wanted to find a website that updates or publishes indices or at least countries with the CAPE data. The best I could find was a weekly market valuation data with the simple P/E ratio on FundSupermart. The next best I could find was Market Cap / GDP, which I personally don't find too attractive due to the lack of usage or research on it.

Finally I got linked back to good ol' Meb Faber here. And that got me to read his research paper that can be downloaded here, which then linked me to an awesome paper about dividend equities "The High Dividend Yield Advantage". I strongly recommend reading that to know why I have a strong preference for dividends.

And all this is so coincidental, because Meb Faber just updated with a post, updating on the returns from the CAPE countries he listed about a year ago. The results, as in his paper, shows the CAPE is a fairly accurate indicator.

Although I'm not keen on directly investing into specific countries, I would love to be able to check what are the CAPE figures for the MSCI World, EM and Asia ex Japan. These would help me decide on a fundamental basis if I want to OW or UW the respective funds. Sadly, I don't know where I can find such information, and I am not keen on doing my own research, and then melding it into a strategy.

I am really trying to simplify my processes these days, and try to stand a bit further back and make less rash decisions.

No comments:

Post a Comment

Observe the house rules.