Is the Yardstick ratio “a good yardstick†for stock market valuations?

Máté Bors (), Delong Li () and Yiguo Sun
Additional contact information
Máté Bors: University of Guelph
Delong Li: University of Guelph

Economics Bulletin, 2021, vol. 41, issue 3, 1444-1450

Abstract: This note empirically examines whether there is a long-run relation between a country's Yardstick ratio––i.e., stock-market capitalization divided by GDP––and total stock-market values. Using U.S. data, we show that this relation does not exist. However, after including the VIX index, our model successfully identifies a stable long-run relation among the three variables. We argue that, possibly, the Yardstick ratio reflects firms' dividend payments, and VIX represents market discount rates. Our novel results indicate that the rule of thumb among practitioners of using the Yardstick ratio as “the best single measure†of stock-market valuations is not well grounded.

Keywords: Market capitalization; VIX; Yardstick ratio. (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2021-09-17
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2021/Volume41/EB-21-V41-I3-P123.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-21-00305

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().