Expected Returns

The inverse of the P/E Ratio is a good indicator for the yield of the equity market. For example, a P/E Ratio of say, 22 for an Equity Index translates into a equity market yield of 4.54%. 

The roll down returns are the best used as expected retunrs. For example, the US Treasury bond yield of 4.15% requires a flat yield curve and reainvestment risk of the coupons. The 3-month roll down return of the US 10-year bond is 1.188%.

The roll down returns are the best used as expected retunrs. For example, the 10-year German Bond yield of 2.85% requires a flat yield curve and reainvestment risk of the coupons. The 3-month roll down return of the German 10-year bond is 0.87%.

The foreign exchange prices are estimated using the Purchase Power Parity, the Uncovered Interest Rate Parity, and the recent price development:

EURUSD

- Carry: 1.170

- Value : 1.151

- Trend 1.139

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