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Sunday 22 February 2015

A bond yield versus equity yield comparison has been used in practice.

http://en.wikipedia.org/wiki/Fed_model

A bond yield versus equity yield comparison has been used in practice long before the Fed published the graph and Yardeni gave it a name. A variant of this, first the expected AAA bond yield from the Blue Chip survey verusus the forward-earnings yield on the S&P 500, and then later versus the 10-year Treasury was developed by Dirk van Dijk at I/B/E/S in the mid-1980s.

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