Tom Coyne publishes his estimates of which stock markets are overvalued and which are undervalued in the monthly Index Investor newsletter. Here's the section from the most recent letter. The introduction is somewhat heavy, but worth ploughing through so you understand the table that follows:
Our market valuation analyses are based on the assumption that markets are not perfectly efficient and always in equilibrium. This means that it is possible for the supply of future returns a market is expected to provide to be higher or lower than the returns investors logically demand.
In the case of an equity market, we define the future supply of returns to be equal to the current dividend yield plus the rate at which dividends are expected to grow in the future.
We define the return investors demand as the current yield on real return government bonds plus an equity market risk premium.
As described in our May, 2005 issue, people can and do disagree about the “right