Friday, August 9, 2013

Emerging Markets Price-to-Book Ratio & Forward Returns

Here is an interesting look from J.P Morgan regarding the Price-to-Book ratio on Emerging Markets.

They then look at how those various Price-to-Book ratios relate to forward 1-year returns....In short, it looks good.

Although I don't like that the 1-year forward returns only use 1999 to today. Why not use the same data as the first graph back to 1993? Also, I don't tend to think any valuation metric is a reliable short-term (1 year) timing indicator. However, Rob Arnott has also been pointing out that longer-term forward returns (10 years) are also looking pretty tempting using a Shiller PE ratio. All I know is, anything looks good 'relative' to the US right now.

8 comments:

  1. Where can we see the P/B ratios by Emerging Market country?

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    Replies
    1. Easiest way would be to just look at the individual country ETFs at a place that provides P/B ratios (like morningstar.com or many others). To save you the trouble I made that info here. However, I left off Hungary since it doesn't have an ETF (yet).

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    2. iShares shows much higher P/B ratios than you do. For example, you show EEM as 1.36, but their website shows it as 3.10 as of 7/31/2013.
      http://tinyurl.com/kyfl843
      How do you explain this discrepancy?

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    3. Ya, odd but it's clear the Ishares website is screwed up...also says PE is 18.5?? Umm no. I took my data from Morningstar workstation which was as of 8/9/13 but you can go direct to MSCI which has a fact sheet (PDF) for the MSCI emerging markets index as of 7/31/13. Also took a snapshot of that here. It shows that as of 7/31/13 P/B was 1.49 and PE 11.9. Far cry from 3.1 P/B and 18.5 PE according to Ishares website....interestingly Ishares website is the only place I can find giving those odd figures for the ETF -- if that was correct for the ETF it would officially be the worst tracking ETF I can think of lol.

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  2. Would you please review and comment on this country ranking analysis? http://tinyurl.com/lo8gk87
    Seems legit, but it is beyond my comprehension. Also, it varies dramatically from your results.
    Thank you.

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    ReplyDelete