News and publications


The Shiller PE at 40x - A look in the rear mirror

The Shiller P/E has long been advertised as a superior valuation measure. Now, this proliferate indicator has surpassed the psychologically important mark of 40x and is close to its last all-time high reached during the Dotcom bubble. Our article investigates what share buybacks may have to do with the structurally higher Shiller P/E observed since the turn of the century and what current levels imply for expected equity returns.


How justified are the record PE spreads in equity markets

Forward-looking aggregate equity market valuations, at least in Europe, still don't look excessive. However, under the hood, parts of the universe have experienced massive multiples expansion and are now more expensive than during the Dotcom bubble. At the same time, the cheaper stocks are as cheap as ever. Our study shows that this phenomenon is more broad-based than anecdotal evidence indicates, and we find it increasingly concerning.


Are value stocks a good inflation hedge?

Value stocks are assumed to have a shorter duration than growth stocks and are therefore expected to outperform during times of rising interest rates. Unfortunately, in practice, those correlations tend to be very noisy and less predictable than often presumed. In this article, we study the empirical relationship between the relative performance of the factor and changes in interest rates, inflation, and economic activity in the United States since the 80s.


How many stocks are sufficient for adequate diversification?

A couple of research papers published decades ago taught investors that holding 20 to 30 single stocks results in a sufficiently diversified portfolio. This belief turned out to be stubbornly persistent even though numerous more sophisticated studies have since contested it. This paper looks into different definitions and measures of diversification and empirically assesses the limitations of concentrated portfolios through an approach using active risk minimization.