I've seen a variety of different average market PER's quoted from various sources ranging from about 15 - 18 or so.
I don't know how each of the quoted numbers are calculated...ie..whether they are based on prospective or historical EPS and/or whether they are weighted in any way...ie..according to market cap, index weighting or whatever.
Although I look at avge market PER's as only a ball park guide to whether the market is cheap or not I would prefer to be looking at a weighted, prospective market PER to help form my opinion.
So I have decided to calculate my own "average market PER" as follows:
1) I downloaded the constituents of the S&P ASX50 into an Excel spreadsheet from www.standardandpoors.com I'm adopting the KISS principle atm so only using ASX50 stocks for now.
2) I got the forcast 2006 EPS and ASX50 % weightings from Commsec research (I hope they're correct )
3) I then calculated the simple arithmetic and weighted (according to the company ASX50 index weights) average PER for the ASX50 index. The share prices are from the S&P site and look to be last Thursday's closing prices.
The data I used and results are in the attached (I hope ) spreadsheet. I've never tried to upload a spreadsheet so I hope it works. If it or a link to it doesn't appear below in this post I'll try to find another way of posting it.
In case the spreadsheet hasn't uploaded, the unweighted prospective 2006 average ASX50 PER = 16.0. The weighted prospective 2006 average ASX50 PER = 15.4
If anyone wants to download the spreadsheet to build on it, add more companies or whatever, then please do so. This spreadsheet is just a starting point atm.
If anyone has any suggestions on how to improve it, I'm all ears .
I'm using Excel 97 so later versions should open the spreadsheet.