Cape Around the World: Update 2014 – The Relationship between Risk and Return

13 Pages Posted: 24 Jul 2014

See all articles by Joachim Klement

Joachim Klement

Fidante Partners

Oliver Dettmann

Wellershoff & Partners Ltd

Date Written: July 24, 2014

Abstract

We update our annual analysis of expected returns for 38 equity markets around the world. Based on current CAPE valuations, we expect mid to high single-digit yearly returns in most developed equity markets. However, risks are elevated for some markets. We specifically investigate drawdown risk and find that given its current valuation levels, the US market in particular exhibits a high risk of significant future drawdowns.

Keywords: Shiller PE, cyclically adjusted PE, equity market returns, drawdown risk

JEL Classification: G12

Suggested Citation

Klement, Joachim and Dettmann, Oliver, Cape Around the World: Update 2014 – The Relationship between Risk and Return (July 24, 2014). Available at SSRN: https://ssrn.com/abstract=2470935 or http://dx.doi.org/10.2139/ssrn.2470935

Joachim Klement (Contact Author)

Fidante Partners ( email )

1 Tudor Street
London, EC4Y 0AH
United Kingdom
02078320956 (Phone)

Oliver Dettmann

Wellershoff & Partners Ltd ( email )

Zürichbergstrasse 38
Zürich, 8044
Switzerland

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