Strategies · Core
Value Factor — CAPE Effect within Countries
Overweight cheap country indexes on CAPE (or similar cyclically adjusted earnings yield) and underweight rich ones.
Definition
Compute CAPE (or CAPE yield) per country, rank, long cheap, short rich, yearly. Accounting regimes and index composition make CAPE noisy across borders. Still one of the cleaner slow country-value signals.
Why it matters
Country allocation needs a value handle that is not last year’s price. CAPE is the popular one.
Case
US expensive vs Europe cheap for a decade. The cheap side can stay cheap. Horizon is years, not quarters.
How to read it
Comparable earnings, float, and FX. A CAPE gap that is a sector-mix gap (US tech vs Europe banks) is not a bargain by itself.
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