Valuations Full-Year 2017

CAPE Valuations Full-Year 2017

For those of you following my quarterly CAPE updates, you’ll know I have been tracking the ten cheapest markets worldwide, as listed on  This post marks the first full year holding a virtual portfolio of nine ETF’s, tracking these ten cheapest countries by CAPE ratio.  So to finish out the year, let’s see how your returns might have fared had you held for the full year.

The CAPE Ratio

If you are not already aware of it, the CAPE (Cyclically Adjusted Price-Earnings ratio) was created by Professor Robert Shiller and works by taking the price of a market/stock/sector and dividing it by the average of ten years of earnings, adjusted for inflation.  I highly recommend the work of Meb Faber on the CAPE ratio if you want to find out more (

As usual, I refer to the valuations as stated on the website of Star Capital, a wonderful (and free) resource kindly updated regularly.  The purpose of this post series is to take an investment in nine ETF’s at the start of each calendar year and hold them for 12 months, re-balancing each year.  At the beginning of the year I composed a portfolio of the following ten countries:

Russia, Czech Republic, Turkey, Brazil, Poland, Portugal, Singapore, Spain, Hungary & Italy.

CAPE Valuations Full-Year 2017

So how would you go about investing in these ten countries, and what returns would you have potentially seen had you held for the year?

  • Russia

The iShares MSCI Russia Capped ETF (ERUS) carries a 0.62% expense ratio and has returned 3.20% year-to-date.

  • Czech Republic

There is no ETF for the Czech Republic at present, although the Cambria Global Value ETF (GVAL) has an 7.6% exposure to the country, with an expense ratio of 0.69%.  It has returned 18.27% year-to-date.

  • Turkey

The iShares MSCI Turkey ETF (TUR) carries a 0.62% expense ratio and has returned 31.68% year-to-date.

  • Brazil

The iShares MSCI Brazil Capped ETF (EWZ) carries a 0.62% expense ratio and has returned 19.58% year-to-date.

  • Poland

The iShares MSCI Poland Capped ETF (EPOL) carries a 0.62% expense ratio and has returned 48.81% year-to-date.

  • Portugal

The GlobalX MSCI Portugal ETF (PGAL) carries a 0.62% expense ratio and has returned 20.85% year-to-date.

  • Singapore

The iShares MSCI Singapore Capped ETF (EWS) carries a 0.48% expense ratio and has returned 32.18% year-to-date.

  • Spain

The iShares MSCI Spain Capped ETF (EWP) carries a 0.48% expense ratio and has returned 26.84% year-to-date.

  • Hungary

The Cambria Global Value ETF (GVAL) now has a much smaller exposure to Hungary, with an expense ratio of 0.69%.  It has returned 18.27% year-to-date.

  • Italy

The iShares MSCI Italy Capped ETF (EWI) carries a 0.48% expense ratio and has returned 28.91% year-to-date.


Impressively, all holdings gave a positive return for the full year.  The third quarter posted the strongest returns, with modest improvements in the fourth quarter.  As a result, the total return for all nine ETF holdings for 2017 was 25.59%.  A very respectable performance, although allowing for currency fluctuations this return may differ somewhat.  This is also gross of fees, of course.

I personally held an emerging markets Eastern Europe ETF for most of the year (until it was closed in November) which gave me a very nice return in itself.  By CAPE ratio, there clearly remains value in Eastern European countries such as Russia, the Czech Republic and Poland (even allowing for Poland’s stonking return).  In the new year I will be reviewing my options with regard to a replacement ETF.

As an exercise, I’m pleased to see some evidence that a cheap basket of low-CAPE ETF’s can generate healthy returns.  In January I will review the current ten cheapest and begin the process again.  As mentioned earlier, this portfolio was designed to be re-balanced annually.  As things stand, it appears likely that most of the current holdings will remain as they are still very cheap.

I hope this has been of some interest to you this year.

Happy investing!

Leave a comment below, or find me on Twitter @BritishInvestor

6 thoughts on “CAPE Valuations Full-Year 2017”

  1. I think this sort of cheap CAPE portfolio should work well given enough time. In fact, in the mid-2000s I was getting into this sort of thinking, but the data just wasn’t available back then so I ended up applying the same ideas to individual stocks instead.

    Now that the data is available it’s good to have somebody running the experiment, so keep up the good work! (preferably for at least ten years so we have a good dataset to work with!).

    Merry Christmas

    1. Thanks, John. Having read the works of Meb Faber, I became somewhat fascinated by the idea of tracking a basket of ETF’s. Hopefully it’s interesting to others as well.

      Merry Christmas to you, too.

    1. Hi James

      That is a most excellent idea, thank you for suggesting it. I shall incorporate that into my next update.

      Thanks for taking the time to look into it.


  2. Hi, have you had any luck finding another Eastern Europe ETF that covers multiple countries?
    Out of interest, what was the name of the ETF that is no longer available?

    Thanks for the work you in keeping this blog,

    1. Hi Christian

      I haven’t yet looked, so can’t answer your first question I’m afraid. With regard to the no longer available ETF, it was the SPDR MSCI EM Europe ETF.

      Hope that helps!


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