Predicting Equity Returns for 37 Countries: Tweaking the Gordon Formula

Kenneth S. Reinker and Edward Tower

No 02-22, Working Papers from Duke University, Department of Economics

Abstract: Recently, there has been a lot of discussion about whether and how much the U.S. stock market is overvalued, leading some economic gurus to suggest that foreign markets may be good investments. We ask whether this is the case and apply the Gordon formula to predict future real rates of return on three Morgan Stanley Capital International indices and 37 individual country indices. Our conclusion is that, as a whole, foreign markets do indeed promise significantly higher future returns than the U.S. market does, suggesting that an increased focus on international diversification by investors and fund managers could be beneficial.

JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-fin and nep-fmk
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