in everything that is somehow connected with economic science, a clear understanding of the background and the consequent limitations of conclusions – it is one of the most basic foundations of survival.
based on Goldman's graph (), you might get the impression, that the Russian market has a crazy upside, and japanese – the same downside. actually, we need to weigh our P / E into sectors, for example. because, that different markets have different sectoral structure, and cover different parts of the economy.
it's one thing when we are dominated by the consumer / mechanical engineering, another thing, when the same oil and gas.
The P / E of the two groups is completely different, whatever the prospects of the raw materials.
although in the USA the sectoral P / E is not so aggregated, to be very different, but you shouldn't lose sight of the idea.
the same goes for the idea of comparing market capitalization in GDP.
for that, to talk about something, you need to first weigh on the share of public companies in total sales / profit / employment / what you want.
and there is still a question:
but how to correctly calculate the aggregated P / E?
1) (Capitalization A + Capitalization B)/(Profit A + Profit B) – ?
2) (P / E A + P / E B)/2 – ?
naturally, a question arises on paragraph `` 2)" – pier, what nonsense?
do not hurry) we look, what is P / E – market assessment of future growth rates. if we want to aggregate exactly the `` market valuation '', ie. & quot; psychological factor & quot;, then we need exactly item & quot; 2)". example, 10 companies in the sector, one belongs 90% all profits – hence, influence on P / E sectors is maximum when using item & quot; 1)". the consequences are standard: revaluation of small companies to the sector, etc..
