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The S&P 500 Current Record-High Levels against Fundamental PE and PBV Ratios

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  • Dimiter Nenkov

Abstract

The subject of this research is the performance of the S&P 500 index during the last decade, including in the context of the 2020 Covid pandemic. The main issue of interest is whether the index price levels are supported by fundamentals, or there is a bubble on the US stock market. The study is based on the use of the price-earnings ratios (PE) and price-to-book ratios (PBV) of the index during this period. The 2020 PE and PBV of the index are compared with historical market PE and PBV ratios. Another aspect of the analysis also involves fundamental PE and PBV ratios of the S&P 500 index, which are derived from the fundamentals, determining the value of stocks in the index. The results of the analysis do not confirm the validity of the high current PE and PBV ratios and do not justify the high stock price levels of the S&P 500 during most of 2020.

Suggested Citation

  • Dimiter Nenkov, 2021. "The S&P 500 Current Record-High Levels against Fundamental PE and PBV Ratios," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 93-113.
    • Handle: RePEc:bas:econst:y:2021:i:8:p:93-113
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    File URL: https://www.iki.bas.bg/Journals/EconomicStudies/2021/2021-8/5_Nenkov.pdf
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    References listed on IDEAS

    as
    1. Robert J. Shiller, 2015. "Irrational Exuberance," Economics Books, Princeton University Press, edition 3, number 10421.
    2. Robert J. Shiller, 2012. "Finance and the Good Society," Economics Books, Princeton University Press, edition 1, number 9652.
    3. Emanuel Bagna & Enrico Cotta Ramusino, 2017. "Market Multiples and the Valuation of Cyclical Companies," International Business Research, Canadian Center of Science and Education, vol. 10(12), pages 246-266, December.
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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