People often use the S&P 500 PE ratio to gauge how expensive stocks are at any given time. This however doesn’t account for projected earnings growth or return rates on alternative investments. I feel like the effective equity risk premium however would account for both of these variables and result in a much more useful measure of how expensive stocks are.
Does anyone have any experience investigating this? Are there any nuances that aren’t immediately obvious that limit this metrics usefulness in gauging valuations? Lastly is anyone aware of some sources that provide historical values for equity risk premiums? I’m more than happy to do the calculations myself if need be, but it will require quite a bit of other data to do so.
Thanks in advance for any of your thoughts on the topic.
Submitted May 28, 2019 at 11:06AM by teachmecreativity http://bit.ly/2JJqaXf
