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Testing the Stock Market Earnings Yield-TIPS Yield Delta

Steve LeCompte | | Posted in: Fundamental Valuation

"Predicting Stock Market Return with Stocks-TIPS Yield Delta" summarizes results of a study finding that deviations of the S&P 500 earnings yield from the real government bond yield, as measured by the 10-year Treasury Inflation-Protected Securities (TIPS) coupon yield, has statistical power to predict future stock market returns. To corroborate this finding from an investing perspective, we:

Using monthly data as specified during January 2003 (limited by the TIPS series) through November 2024, we find that:

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