A New Valuation Measure for the Stock Market

• Activity Number: 168 - Risk analysis and related topics
• Type: Contributed
• Date/Time: Tuesday, August 10, 2021 : 10:00 AM to 11:50 AM
• Sponsor: Section on Risk Analysis
• Author(s): Andrey Sarantsev*
• Companies: University of Nevada Reno
• Keywords: unit root test; Shapiro-Wilk test; autoregression; total returns; earnings growth

Abstract

We generalize the work by Robert Shiller, a Nobel Prize Winner in Economics in 2013, to create a statistically significant measure of valuation for the stock market. We compare total returns, including price changes and dividends paid, with earnings growth. We fit a simple autoregressive model and perform goodness of fit tests. This talk is based on arXiv:1905.04603.