All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

Máté Bors, Delong Li and Yiguo Sun
''Is the Yardstick ratio “a good yardstick” for stock market valuations?''
( 2021, Vol. 41 No.3 )
This note empirically examines whether there is a long-run relation between a country's Yardstick ratio––i.e., stock-market capitalization divided by GDP––and total stock-market values. Using U.S. data, we show that this relation does not exist. However, after including the VIX index, our model successfully identifies a stable long-run relation among the three variables. We argue that, possibly, the Yardstick ratio reflects firms' dividend payments, and VIX represents market discount rates. Our novel results indicate that the rule of thumb among practitioners of using the Yardstick ratio as “the best single measure” of stock-market valuations is not well grounded.
Keywords: Market capitalization, VIX, Yardstick ratio.
JEL: G1 - General Financial Markets
Manuscript Received : Mar 31 2021 Manuscript Accepted : Sep 17 2021

  This abstract has been downloaded 109 times                The Full PDF of this paper has been downloaded 137314 times