Multiples such as D/P, P/E, and CAPE are useful when forecasting long-term returns, and largely useless when forecasting short-term returns. Given this mixed forecasting ability, the issue addressed in this article is whether these multiples can be used to devise successful asset allocation...

The most widely-used measure of an asset's risk, beta, stems from an equilibrium in which investors display mean-variance behavior. This criterion assumes that portfolio risk is measured by the variance (or standard deviation) of returns. However, the semivariance is a more plausible measure of...

SUBJECT AREAS: valuation, investment analysis, portfolio management, country analysis, emerging markets, development economics.This paper gives an overview of research and practice issues in the valuation of assets in emerging markets. It introduces a special edition in Emerging Markets Review...

SUBJECT AREAS: Stock pricing; Dividend-discount model; P/E ratiosThe case aims to introduce students to the issue of firm valuation by applying both the dividend discount model and multiples. Valuation using the discounted cash flows (DCF) model is typically addressed later in the course (after...

SUBJECT AREAS: Valuation in emerging markets; Cost of equity in emerging marketsThe case aims to introduce MBAs and executives to the issue of valuation in emerging markets. It stresses the differences between estimating the expected cash flows and cost of capital of companies in developed...

The case portrays the situation of Telefonica, Spain's largest company, on November, 1998, at the time it has to decide the dividend for the year. The situation is particularly interesting given that Telefonica was on the one hand generating large profits, but on the other it was under intense...

The standard deviation, arguably the most widely-used measure of risk, suffers from at least two limitations. First, the number itself offers little insight; after all, what is the intuition behind the square root of the average quadratic deviation from the arithmetic mean return? Second,...

Most investors agree that investing in emerging markets is risky, but not all of them agree on the best strategy to deal with this risk. Some investors view the high volatility of these markets as an opportunity to make large short-term profits and actively trade; others view it as a risk than can...

Do investors in the U.S. stock market obtain their long term returns smoothly and steadily over time, or is their long term performance largely determined by the return of just a few outliers? How likely are investors to successfully predict the best days to be in and out of the market? The...

Do investors obtain their long term returns smoothly and steadily over time, or is their long term performance largely determined by the return of just a few outliers? How likely are investors to successfully predict the best days to be in and out of the market? The evidence from 15...