sfe · Valuation · Elgers, Lo and Pfeiffer (2001)

Earnings Forecast to price

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1977Q2 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

2.27%

95% interval 0.97% to 3.60%

Next year

2.26%

95% interval 0.92% to 3.61%

Next five years

2.25%

95% interval 0.75% to 3.66%

Next quarter

2.59%

95% interval 1.24% to 3.90%

Next year

2.55%

95% interval 1.22% to 3.88%

Next five years

2.44%

95% interval 0.98% to 3.86%

Next quarter

2.59%

95% interval 0.88% to 4.29%

Next year

2.56%

95% interval 0.79% to 4.32%

Next five years

2.47%

95% interval 0.39% to 4.43%

Next quarter

2.95%

95% interval 1.26% to 4.62%

Next year

2.88%

95% interval 1.24% to 4.54%

Next five years

2.65%

95% interval 0.91% to 4.37%

Cumulative market-adjusted return

+5,893% since 1977Q2 · log scale

Window	Mean	Vol.	Sharpe	t
1977Q2–2024Q4	10.56%	19.93%	0.53	3.66
2020Q1–2024Q4	5.89%	31.36%	0.19	0.42
2024Q1–2024Q4	4.79%	20.22%	0.24	0.24
1977Q2–2024Q4	11.20%	19.76%	0.57	3.91
2020Q1–2024Q4	13.95%	29.74%	0.47	1.05
2024Q1–2024Q4	7.59%	22.43%	0.34	0.34
1977Q2–2024Q4	11.73%	26.41%	0.44	3.07
2020Q1–2024Q4	10.36%	43.17%	0.24	0.54
2024Q1–2024Q4	11.77%	31.35%	0.38	0.38
1977Q2–2024Q4	12.15%	23.52%	0.52	3.57
2020Q1–2024Q4	19.62%	34.89%	0.56	1.26
2024Q1–2024Q4	5.58%	34.13%	0.16	0.16

Horizon	Mean	95% interval	P(neg)
Next quarter	0.228	0.097 – 0.361	0.00
Next year	0.227	0.092 – 0.362	0.00
Next five years	0.226	0.076 – 0.367	0.00
Next quarter	0.262	0.125 – 0.395	0.00
Next year	0.258	0.123 – 0.393	0.00
Next five years	0.247	0.098 – 0.390	0.00
Next quarter	0.197	0.066 – 0.326	0.00
Next year	0.194	0.060 – 0.328	0.00
Next five years	0.187	0.029 – 0.336	0.01
Next quarter	0.252	0.107 – 0.396	0.00
Next year	0.245	0.105 – 0.387	0.00
Next five years	0.225	0.077 – 0.370	0.00