R & A research

Equity markets

We explain equity market valuations in a simple model: Equity valuations - their role in investment decisions.

Summary of the R & A Shiller-CAPE model:

  • We provide an estimate of the Shiller cyclically adjusted price/earnings (CAPE) ratio based on economic variables. Our estimate explains more than 90% of the CAPE ratio’s variability in the past six decades.
  • The conditions for the Shiller CAPE ratio to be mean reverting are not generally met. Notably, inflation, which is an important factor explaining the level and trend of the CAPE ratio, cannot be assumed to be mean reverting.
  • For practitioners, our model provides a fair-value estimate of the stock market at any point in time, allows simulations (e.g., of expected returns under a recession scenario), and yields useful forecasts for horizons of three to four years.

Economic themes

Emerging Asia contributes over half of world economic growth and is home to half of the world’s population. Our study covers fundamentals and qualitative business indicators and investment opportunities.

Global demographic trends have a strong impact on world growth. Our study summarizes the main issues and trends. (German version)

How does the ageing of the world population affect consumption? Which investments will benefit?

Sector themes

How does consumer behavior change over time? Which industries are growing faster, which more slowly? The trends seen in recent decades allow conclusions for the future. Sectors 2050: Global secular sector trends and themes.

The demand for food is growing more slowly than the economy as a whole. Sectors 2050: Global food demand trends.

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