P/E compression - Ceta Research

P/E compression

China P/E Compression: +1.07% CAGR, -2.48% vs the SSE Composite

P/E compression on Chinese stocks returns 1.07% a year against 3.54% for the SSE Composite. Fully invested for all 25 years, so this failure isn't a data artifact. Negative Sharpe, -70% max drawdown, 94% down-capture.

P/E compression

Hong Kong P/E Compression: -0.69% CAGR, -1.18% vs Hang Seng

P/E compression on Hong Kong stocks returns -0.69% 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 97% and up-capture 95%, so the strategy offers no protection the index doesn't.

P/E compression

Germany P/E Compression: -1.13% vs the DAX, Against a Fair Benchmark

P/E compression on German stocks returns 3.32% annually vs 4.45% for the DAX. The DAX reinvests dividends, so unlike most markets in this study the comparison is like-for-like. Germany is the fair test, and the strategy loses it.

P/E compression

Switzerland P/E Compression: The Edge Belongs to Foreign Listings

P/E compression on Swiss-listed stocks returns 2.46% vs 1.90% for the SMI. That +0.56% is smaller than the index dividend yield, rests on 12 investable years of 25, and flips to -1.62% on a Swiss-domiciled universe.

P/E compression

Japan P/E Compression: +2.45% Annual Alpha vs Nikkei 225

P/E compression on Japanese stocks returns 5.40% annually vs 2.95% for the Nikkei 225, beating the local benchmark by 2.45% per year with 53% down-capture. The strategy works in Japan when compared against the correct local benchmark.

P/E compression

Thailand P/E Compression: -0.80% vs the SET, and 11 Years With No Position

P/E compression on Thai stocks returns 3.36% annually vs 4.16% for the SET Index. The earlier +3.90% alpha was an artifact of thin price data. The strategy had no position at all in 11 of 25 years.

P/E compression

Canada P/E Compression: +5.69% Annual Alpha vs TSX Composite

P/E compression on Canadian stocks returns 10.13% annually vs 4.44% for the TSX Composite. +5.69% annual alpha, 19 wins in 25 years, 44% down-capture and 142% up-capture. The strongest result in a 21-market study.

P/E compression

P/E Compression in the UK: 2.48% CAGR, and 9 of 25 Years in Cash

P/E compression on UK stocks returns 2.48% annually (GBP) vs 0.86% for the FTSE 100 price index. Adjust for the FTSE's 3.5% dividend yield and the edge disappears. The strategy also sat in cash for 9 of 25 years.

P/E compression

India P/E Compression: 5.79% CAGR, Lagging the Sensex by 5.61% a Year

P/E compression on Indian NSE stocks delivers 5.79% CAGR vs 11.40% for the Sensex, underperforming by 5.61% a year. Most of the gap is one eight-year hole at the start where thin price data left the strategy with no position.

P/E compression

P/E Compression: 10.92% 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 10.92% annually vs 7.64% for SPY, with 3.27% excess return and 49% down-capture.

P/E compression

P/E Compression Across 21 Global Markets: 7 of 18 Beat Their Benchmark

P/E compression tested across 21 global markets. Three can't be assessed at all. Of the 18 that can, 7 beat their benchmark, and only Canada, the US and Japan survive once you account for benchmarks that exclude dividends.