## Figure 1.9. Asset Valuations

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**Canonical URL:** [Figure 1.9. Asset Valuations](https://www.imf.org/-/media/files/publications/gfsr/2018/oct/ch1/pdf/figure1-9.pdf)

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### U.S. Equity Valuations and Cyclically Adjusted P/E
- Equity valuations in the United States have continued to rise well above precrisis highs.
- Cyclically Adjusted Price-to-Earnings Ratio (Z-score) panel shows U.S. equity valuations appear to be stretched relative to underlying fundamentals.

### Market-Implied versus Model-Based Equity Volatility
- Market implied volatility is lower than that from model-based forecasts.
- Panel 3: "U.S. Equity Volatility: Market-Implied versus Model-Based Forecast" (Over different time horizons, percent) contrasts market-implied paths with model-based forecasts.

### U.S. Equity Prices versus Model-Based Fair Values
- Panel 2: "U.S. Equity Prices versus Model-Based Fair Values" compares actual S&P 500 index levels to weighted average fitted values, model-based estimates range, and minimum-maximum of the range since Oct. 1998.
- Equity prices are richer—panels indicate deviation from weighted-average fitted value with periods where prices are noticeably above fitted values.

### 10-Year Term Premiums
- Term premiums are historically low but are mostly fairly priced based on fundamentals.
- Panel 4: "Deviation from Fitted 10-Year Term Premium (Percentage points)" uses term premium estimates based on the Adrian, Crump, and Moench (2013) model and compares them to weighted-average fitted term premium based on fundamental variables.

### Corporate Bond Spreads and Residual Market Risk Premiums
- Corporate spreads remain very low, given creditworthiness of borrowers.
- Panel 5: "Residual Market Risk Premiums for U.S. and Emerging Market Dollar-Denominated Corporate Bonds (Difference between the corporate spread and the default risk component, percent)" shows the estimated risk premium defined as the difference between the observed monthly bond spread and the estimated default risk compensation based on default probability by rating.
- Dashed lines in the panel denote period averages.

### Housing Market Valuations
- Housing market valuations have surged in many advanced economies.
- Panel 6: "Housing Market Valuations (Z-scores over 1990–2017)" reports average z-scores based on pooled data for house price-to-income ratio, house price-to-rent ratio, and inverse of mortgage rates.
- AE = advanced economy; panels show country comparisons including United States, France, United Kingdom, Germany, Japan, Canada, Italy, and Emerging markets.

*Sources: Bank of International Settlements; Bloomberg Finance L.P.; Consensus Economics; Datastream; Thomson Reuters I/B/E/S; ICE Bank of America Merrill Lynch; JP Morgan Chase & Co.; IMF, International Financial Statistics database; Standard & Poor’s; and IMF staff calculations.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2018/oct/ch1/pdf/figure1-9.pdf_