Даулы акция бағалау моделі

Disputed equity valuation model
[[Image:S and P 500 pe ratio to mid2012. png|320px|right|thumb|Robert Shiller's plot of the S&P 500 price–earnings ratio (P/E) versus long term Treasury yields (1871–2012), from Irrational Exuberance. The P/E ratio is the inverse of the E/P ratio, and from 1921 to 1928 and 1987 to 2000, supports the Fed model (i. e. P/E ratio moves inversely to the treasury yield), however, for all other periods, the relationship of the Fed model fails; Yardeni noted that the then Fed Chair Alan Greenspan, seemed to use the relationship between the forward earnings yield on the S&P 500 Index and the 10 year Treasury yield in assessing levels of equity market over or under valuation. Yardeni quoted a paragraph and graphic (see image opposite), from the Fed's July 1997 Monetary Policy Report to the Congress, which implied Greenspan was using the model to express concerns about market overvaluation, with Yardeni saying: "He [Greenspan] probably instructed his staff to devise a stock market valuation model to help him evaluate the extent of this irrational exuberance":

blockquote| changes in this ratio [P/E of the S&P 500 index] have often been inversely related to changes in the long term Treasury yields, but this year's stock price gains were not matched by a significant net decline in interest rates. As a result, the yield on ten year Treasury notes now exceeds the ratio of twelve month ahead earnings to prices by the largest amount since 1991, when earnings were depressed by the economic slowdown.|Federal Reserve Humphrey Hawkins report (22 July 1997). In December 2020, Fed Chair Jerome Powell, invoked the "Fed Model" to justify high stock market price earnings ratios (then approaching levels of the Dot com bubble, in a period called the everything bubble), saying: "If you look at P/Es they're historically high, but in a world where the risk free rate is going to be low for a sustained period, the equity premium, which is really the reward you get for taking equity risk, would be what you'd look at". Yardeni said Powell's actions in 2020, countering the financial effects of the COVID 19 pandemic, could form the greatest financial bubble in history. The Fed model is often cited by equity strategists and economists to justify lofty equity valuations. It's not too often that a Fed chair engages in that exercise.|author=Bloomberg (December 2020)

In February 2021, The Wall Street Journal noted that stock valuations were in a bubble on almost every metric except for that of the Fed Model (i. e. 10 year Treasury yields), which the WSJ felt Powell was using as a guide on how far his policy of extreme stimulus/monetary looseness could be used to push stock prices higher.

A number of arguments are listed in favor of the Fed model, the three most important of which are: In a 2003 paper, Cliff Asness argued that investors do set stock market P/Es (inverse of E/P) based on nominal interest rates, but that they do so in error. By confusing real and nominal, investors suffer from "money illusion". The Wall Street Journal noted that the model's use of 1 year forward earnings makes it a favourite of Wall Street analysts whose earnings estimates are " permanently bullish, thus always making stocks look cheap versus [Treasury] yields". In 2020, finance author Mark Hulbert, in demonstrating the poor statistical performance of the model, also emphasized that the competing assets argument is really a "Wall Street sales line": In 2020, when then Fed Chair Jerome Powell used the present value argument to justify high P/E multiples, The Wall Street Journal described Powell's comparison as an attempt to "rewrite the laws of investing". A larger example of Asness' point was post 1990 Japan when the collapse of the Japanese asset bubble saw the earnings yield of the Nikkei rise materially for several decades while Japanese Government bond yields collapsed to almost zero; only when the Bank of Japan started directly buying large of equities from 2013 onwards (i. e. forcing the earnings yield down), did the Fed model begin to reapply. Historical data argument. For a specific period in the United States from 1995 to 2000, the correlation between the forward earnings yield and the 10 year Treasury yield was estimated at 75 percent. However, over the 1881–2002 period the correlation was only 19 percent, and post 2002, the correlation has been weaker, with long periods of complete divergence.

Academics conclude that the model is inconsistent with a rational valuation of the stock market, or past long term observations, and has little predictive forecasting power. In addition, the Fed model only seems to apply for specific periods in the United States, while international markets have shown weak evidence with long period of dramatic divergences (e. g. Japan post 1990, US post dot com burst).

The Fed model equilibrium was only observed in the United States, and for specific time periods, namely 1921 to 1928 and 1987 to 2000; outside of this time window, or in various other international markets, equities and Treasury yields do not show the relationship outlined in the Fed model. In 2017, Stuart Kirk, head of Deutsche Bank's DWS Global Research Institute and a former editor of the Financial Times Lex column, wrote of DWS's analysis of the long term data: "In other words no historical relationship between bond yields and dividend yields. By extension, this means that interest rates have nothing to do with share prices either as the former lead bond yields while dividend yields move with earnings yields (the latter being the inverse of the price/earnings ratio). Yes, correlations can be found in the short run, but they are statistically meaningless".

A test of whether the Fed model is an equity valuation theory with descriptive validity is that it should be able to identify over valued and under valued assets. The analysis shows that the Fed model has no power to forecast long term stock returns, and even crude traditional value investing methods that use only the market's P/E have significantly more efficacy than the Fed model. blockquote|[ ] I discovered [the Fed model] buried in the Fed's Monetary Policy Report of July 1997. It showed a close fit between the earnings yield and the 10 year Treasury bond yield from 1987 through 1997. That's just about when the model stopped working as a useful investment tool. It did show that the S&P 500 was overvalued during the late 1990s. But it has been significantly undervalued ever since then according to the model, which never gave a sell signal in 2007 or 2008.|Dr. Edward Yardeni (April 2014)

In June 2020, finance author Mark Hulbert, ran a statistical test from 1871 to 2020 of the Fed Model's ability to forecast the stock market's inflation adjusted real return over subsequent 1, 5, and 10 year periods, and found that adding long term Treasury yields, per the Fed model, materially reduced the predictive power of just using the earnings yield (E/P) on its own.

It has been shown that the relationship between the forward earnings yield and long term Government bond yields can more substantially breakdown during periods of very low interest rates, and particularly very low real rates of interest, either from natural effects or by deliberate central banking actions such as quantitative easing. Similarly, on the bursting of the dot com bubble in 2002, despite the Fed reducing long term rates post 2002, the earnings yield of the S&P500 rose consistently for the next decade from 4 percent to 9 percent, while long term Treasury yields fell from 6 percent to 2 percent.

It has long puzzled academics that markets only seem to follow the Fed model in the United States, and only for specific periods (e. g. from 1987 to 2000, but not from 2001 to 2013); evidence for the existence of the relationship outside of the United States is even weaker. The use of the Greenspan put by Wall Street investment banks in the 1990s to fund Long Term Capital Management (LTCM), is a noted example, and was the additional use of the Greenspan put to rescue those Wall Street banks after LTCM's collapse.