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Risky value



Publishing details

Social Sciences Research Network

Authors / Editors

Ellahie A;Katz M;Richardson S A


Publication Year



We use a simple accounting based framework to link two primary measures of ‘value’ to expected returns for countries: earnings-to-price (E/P) and book-to-price (B/P). When ‘E’ is more persistent, E/P is close to a sufficient statistic for expected returns. When ‘E’ is less persistent, B/P is needed. High B/P countries are, on average, facing temporarily depressed ‘E’ and their recovery in near term earnings growth is uncertain. Countries with high B/P also exhibit greater downside sensitivity to contemporaneous global earnings growth, consistent with B/P reflecting risky future earnings growth.


equity premium; country returns; value; earnings growth; book-to-price; earnings yield; dividend yield


Social Sciences Research Network

Available on ECCH


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