The S&P500 price-to-earnings ratio stands just short of 20.  By historical measures we can say that this is well above the mean of 15.5.  What we’d really like to know is what kind of future returns can we expect and is the market over-valued.  While answering these questions can be difficult, we believe disciplined investing demands that we take a position.  In this paper, we’ll use the Grinold-Kroner model and assess prospects for the US Market.  We’ll compare our expectations to those of Research Associates and finally we’ll discuss whether the current price puts us in ‘over-valued’ territory.



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US Market Expected Returns