P/E compression - Ceta Research

P/E compression

Canada P/E Compression: +4.37% Annual Alpha vs TSX Composite

P/E compression on Canadian stocks returns 8.81% annually vs 4.44% for the TSX Composite. +4.37% annual alpha, 17 wins in 25 years, 59% down-capture and 133% up-capture vs the local benchmark.

P/E compression

China P/E Compression: -0.68% CAGR, -8.32% vs SPY

P/E compression on Chinese stocks delivers -0.68% CAGR vs 7.64% SPY, the worst absolute performance among all tested markets. Negative Sharpe and -63.70% max drawdown show P/E dynamics differ fundamentally in Chinese markets.

P/E compression

P/E Compression Across 21 Global Markets: 8 Beat Local Benchmarks

We tested P/E compression mean reversion across 21 global stock markets from 2000-2025. The strategy worked in only 4 developed markets (US, UK, Canada, Thailand), underperformed in 16, and couldn't run effectively in 3. The pattern is clear efficiency, stability, and predictable earnings enable...

P/E compression

Germany P/E Compression: Essentially Matches DAX at -0.19% Excess

P/E compression on German stocks underperforms SPY by 3.46% annually. 4.18% CAGR despite zero cash periods and good diversification shows the strategy failed.

P/E compression

Hong Kong P/E Compression: -0.32% CAGR, -0.81% vs Hang Seng

P/E compression on Hong Kong stocks returns -0.32% CAGR vs 0.49% for the Hang Seng. Both the strategy and the local market failed to deliver real returns over 25 years. Down-capture is 95% vs the local benchmark.

P/E compression

India P/E Compression: 8% CAGR but Lags Sensex by 3.40% Annually

P/E compression on Indian NSE stocks delivers 8.00% CAGR vs 11.40% for the Sensex, underperforming by 3.40% per year. Strong absolute returns, but India's bull market is a tough benchmark to beat.

P/E compression

Japan P/E Compression: +2.25% Annual Alpha vs Nikkei 225

P/E compression on Japanese stocks returns 5.20% annually vs 2.95% for the Nikkei 225, beating the local benchmark by 2.25% per year with 52% down-capture. The strategy works in Japan when compared against the correct local benchmark.

P/E compression

Switzerland P/E Compression: +3.47% Annual Alpha vs SMI

P/E compression on Swiss stocks returns 5.36% CAGR vs 1.90% for the SMI. That's +3.47% annual alpha with 23.86% down-capture. Switzerland is one of the clearest positive cases in this series.

P/E compression

Thailand P/E Compression: +3.90% Annual Alpha vs SET Index

We tested P/E compression on 25 years of Thai stock data. The strategy returned 8.06% annually vs 4.16% for the SET Index, with +3.90% excess return and 9.14% down-capture. What looked marginal vs SPY becomes meaningful outperformance against the local benchmark.

P/E compression

P/E Compression in the UK: 9.72% CAGR vs 0.86% for FTSE 100

P/E compression on UK stocks returns 9.72% annually (GBP) vs 0.86% for the FTSE 100, with 8.86% excess return. The FTSE 100 has been a weak benchmark over 25 years. The strategy also beats SPY at 2.08% excess.

P/E compression

P/E Compression: 9.92% CAGR Over 25 Years of US Stock Data

We tested a P/E compression mean reversion screen on 25 years of US stock data. Buy when current P/E drops 15% below its 5-year average with quality filters. The strategy returned 9.92% annually vs 7.64% for SPY, with 2.28% excess return and favorable downside protection.