RT Journal Article SR Electronic T1 Predicting Equity Returns Using Tobin'S q and Price-Earnings Ratios JF The Journal of Investing FD Institutional Investor Journals SP 58 OP 70 DO 10.3905/joi.2003.319555 VO 12 IS 3 A1 Matthew Harney A1 Edward Tower YR 2003 UL https://pm-research.com/content/12/3/58.abstract AB In the spring of 2000, two books predicted a substantial fall in the S&P 500 Index. Robert Shiller's Irrational Exuberance found that, historically, a high price earnings ratio, with real earnings averaged over 10 years, accurately predicts a low real rate of return from investing in the S&P 500 Index. Smithers and Wright's Valuing Wall Street found that a high Tobin's q for the non-financial equities in the S&P 500 does the same. We discover that q beats all variants of the PE ratio for predicting real rates of return over alternative horizons. We also formalize the feedback mechanisms considered in both books.