Rhunzzz

Applying Value Investing Principles at the Country Level

These studies have intrigued me as well. The problem is, for the retail investor who would be interested in ETFs, hard information on the valuations of national stock markets is hard to come by. One can try to go by the valuations of the representative ETFs, but this becomes difficult since different ETF issuers tend to use different measures for valuation ratios.

As an example, the price-to-book ratios for the iShares Japan ETF (EWJ) and the equivalent SPDR (JPP) are very different - 1.47 as opposed to 1.25.

Then there is the familiar question of which ratio. You prefer earnings rather than asset bases for valuations, but then p/e is already so prone to pitfalls for a well-known index like the S&P, let alone that of a single-country index ex-US. Trailing p/e? Forward p/e? Leave out companies that have negative earnings?