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GLOBAL VALUE: BUILDING TRADING MODELS WITH THE 10-YEAR CAPE - Mebane Faber Research paper

beebee
edited November 2012 in Off-Topic
From this research paper:
"Over seventy years ago Benjamin Graham and David Dodd proposed valuing securities with earnings smoothed across multiple years. Robert Shiller popularized this method with his version of the cyclically adjusted price-to-earnings ratio (CAPE) in the late 1990s, and issued a timely warning of poor stock returns to follow in the coming years. We apply this valuation metric across more than thirty foreign markets and find it both practical and useful. Indeed, we witness even greater examples of bubbles and busts abroad than in the United States. We then create a trading system to build global stock portfolios based on valuation, and find significant outperformance by selecting markets based on relative and absolute valuation."

Click on "download this paper" button:
Building a Global Value Trading Model

Comments

  • catch22catch22
    bee, Thank you. Also look to the rightside edge at the site for other papers for download.
    Always something to learn, eh?
  • Old_JoeOld_Joe
    edited November 2012
    Thanks to both of you- skimmed (read text/skimmed graphics) CAPE & Black Swan papers... suggests that now might not be best time to increase exposure as risk of bad (but also good) things happening increases in a declining market.
  • CharlesCharles
    Also from Mebane Faber's site more recently, the following link:

    http://www.indexuniverse.com/webinars/on-demand-webinar-playback/16606-expert-series-dont-get-caught-in-the-value-trap-a-closer-look-at-the-cape-ratio.html

    With Prof Shiller.
  • andrei
    edited April 2013
    If Mebane Faber is so smart, and his strategy is so good, why his fund GTAA is doing so poorly?
  • VintageFreakVintageFreak
    Because there is always a big difference between theory and practice. However I believe theory catches up once in a while. As investors we just have to hit the right curve.

    Anyways, that's what I'm trying to do with Hussman:)
  • CharlesCharles
    edited April 2013
    Reply to @andrei: Who knows. Maybe some folks make better researchers than money managers. One day, I hope to ask him myself.
  • Hiyield007Hiyield007
    edited April 2013
    Reply to @andrei: 47 years in this game and I have found little to no correlation between smarts and investment/trading success. The best at this game are the ones who do their own thing and design their own strategies custom fitted to their unique personality. Most instead rely on the advice, suggestions, recommendations of others on what to buy or sell.
  • Mona
    Reply to @Hiyield007:
    Most instead rely on the advice, suggestions, recommendations of others on what to buy or sell.
    Hiyield007,

    Should I sell PIMIX and buy OSTIX;-)

    Mona
  • Hiyield007Hiyield007
    edited April 2013
    Reply to @Mona: I wasn't kidding was I when I said I have been at this longer than you have been on this earth. Which of course doesn't mean much of anything. Of course your post is tongue in cheek because you know how enamored I am with the persistent trendiness and performance of PIMIX aka PONDX. I am now off to see the latest Tom Cruise flick. Here's some trivia. We graduated from the same Catholic grade school in Louisville (Edit: and he went to my high school there for a year or two, St X, before he left with his Mom for places unknown) Me of course many, many years ahead of him.
  • CharlesCharles
    Reply to @Hiyield007: Very cool. Hope it's good...it's been a while I think since he's had a hit. Please give us thumbs up or down.
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