Canadian stock market multiples and their predictive content
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A substantial variation in the Canadian E/P ratio can be explained by a combination of the lagged level of the E/P along with variability in logical explanatory factors. Moreover E/P ratios have a predictable component, both in the short-term and longer-term. On the other hand, short-term stock market returns are unpredictable. But, consistent with U.S. evidence, longer-term returns are predictable, especially when one conditions on the dividend yield.
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