Historical P/E ratios of small-cap vs. large-cap stocks?
There is most likely an error in the WSJ's data.  Yahoo! Finance reports the P/E on the Russell 2000 to be 15 as of 8/31/11 and S&P 500 P/E to be 13 (about the same as WSJ). Good catch, though!  E-mail WSJ, perhaps they will be grateful.
"What you need to do is go to yahoo finance and look at different stock's P/E ratios. You'll quickly see that the stocks can be sorted by this number. It would be an interesting exercise to get an idea of why P/E isn't a fixed number, how certain industries cluster around a certain number, but even this isn't precise. But, it will give you an idea as to why your question has no answer. ""Annual earnings are $1. What is the share price?"" ""Question has no answer""" "Yes, there are situations where a stock is a bad buy in spite of a low PE. PE ratio tells you the current share price divided by the prior 4 quarters earnings per share. It does not consider: Imagine someone walked up to you and said, ""Do you want to buy a piece of my business? I'll sell you 1% of it for $1000. Last year the business earned $25000."" A quick calculation shows a PE of 4 [$1000/($25000 *.01)]. Even though this PE is comparatively low, you wouldn't buy in without a lot more info. What kinds of things might you ask? PE is one tiny component of an informed investment decision." "You could use any of various financial APIs (e.g., Yahoo finance) to get prices of some reference stock and bond index funds.  That would be a reasonable approximation to market performance over a given time span. As for inflation data, just googling ""monthly inflation data"" gave me two pages with numbers that seem to agree and go back to 1914.  If you want to double-check their numbers you could go to the source at the BLS. As for whether any existing analysis exists, I'm not sure exactly what you mean.  I don't think you need to do much analysis to show that stock returns are different over different time periods." To a certain extent, small cap companies will in general follow the same trends as large cap companies. The extent of this cointegration depends on numerous factors, but a prime reason is the presence of systemic risk, i.e. the risk to the entire market. In simple terms, sthis is the risk that your portfolio will approach asymptotically as you increase its diversification, and it's why hedging is also important.  That being said, small cap businesses will, in general, likely do worse than large cap stocks, for several reasons. This was/is certainly the case in the Great Recession.  Small cap businesses have, on average, higher betas, which is a measure of a company's risk compared to the overall market. This means that small cap companies, on average outperform large cap companies during boom times, but it also means that they suffer more on average during bear times. The debate over whether or not the standard beta is still useful for small cap companies continues, however. Some economists feel that small cap companies are better measured against the Russell 2000 or similar indexes instead of the S&P 500.  Small cap companies may face problems accessing or maintaining access to lines of credit. During the Great Recession, major lenders decreased their lending to small businesses, which might make it harder for them to weather the storm.  On a related point, small businesses might not have as large an asset base to use as collateral for loans in bad times. One notable large cap company that used its asset base to their advantage was Ford, which gave banks partial ownership of its factories during hard times. This a) gave Ford a good amount of cash with which to continue their short-term operations, and b) gave the banks a vested interest in keeping Ford's lines of credit open. Ford struggled, but it never faced the financial problems of GM and Chrysler.  Despite political rhetoric about Main Street vs. Wall Street, small businesses don't receive as much government aid in times of crisis as some large cap companies do. For example, the Small Business Lending Fund, a brilliant but poorly implemented idea in 2010, allocated less than $30 billion to small businesses. (The actual amount loaned was considerably less). Compare that to the amounts loaned out under TARP. Discussions about corporate lobbying power aside, small businesses aren't as crucial to the overall stability of the financial system Small businesses don't always have the manpower to keep up with changes in regulation. When the Dodd-Frank Act passed, large banks (as an example), could hire more staff to understand it and adapt to it relatively easily; small banks, however, don't always have the resources to invest in such efforts.  There are other reasons, some of which are industry-specific, but these are some of the basic ones.  If you want visual confirmation that small cap businesses follow a similar trend, here is a graph of the Russell 2000 and S&P 500 indexes:  Here is a similar graph for the Russell 2000 and the Dow Jones Industrial Average.   If you wanted to confirm this technically and control for the numerous complicated factors (overlap between indexes, systemic risk, seasonal adjustment, etc.), just ask and I'll try to run some numbers on it when I have a chance. Keep in mind, too, that looking at a pretty picture is no substitute for rigorous financial econometrics. A basic start would be to look at the correlation between the indexes, which I calculate as 0.9133 and 0.9526, respectively. As you can see, they're pretty close. Once again, however, the reality is more complicated technically, and a sufficiently detailed analysis is beyond my capabilities. Just a quick side note. These graphs show the logarithm of the values of the indexes, which is a common statistical nuance that is used when comparing time series with radically different magnitudes but similar trends.  S&P500 and Russell 2000 data came from Yahoo! Finance, and the Dow Jones Industrial Average data came from Federal Reserve Economic Data (FRED) Per usual, I try to provide code whenever possible, if I used it. Here is the Stata code I used to generate the graphs above. This code assumes the presence of russell2000.csv and sp500.csv, downloaded from Yahoo! Finance, and DJIA.csv, downloaded from FRED, in the current directory.  Fidelity published an article  on the subject that you might find interesting, and Seeking Alpha has several pieces related to small-cap vs. large-cap returns that might be worth a read too. This is a note from my broker, CMC Markets, who use Morningstar: Morningstar calculate the P/E Ratio using a weighted average of the most recent earnings and the projected earnings for the next year. This may result in a different P/E Ratio to those based solely on past earnings as reported on some sites and other publications. They show the P/E as being 9.93. So obviously past earnings would usually be used but you would need to check with your source which numbers they are using. Also, as BHP's results just came out yesterday it may take a while for the most recent financial details to be updated. "I am doing an assignment for a finance class, and I am writing a recommendation for a specific capital structure. One of the concerns brought up by the ""board of directors"" was interest coverage, so in my addressing that topic in my report, I want to compare to competitors. The interest coverage ratio under this capital structure that I'm choosing is 11.8 and the two competitors we are given information on are Company A (who has an interest coverage ratio of 6.67) and Company B (who has an interest coverage ratio of 11.25). It seems good, but my concern is that I may be missing something, as Company A is similar in size (in terms of sales) to the company I am writing a report for while Company B has ~50 times more sales than the company I am writing a report for.   Advice, things to consider as I move forward?" "For free, 5 years is somewhat available, and 10 years is available to a limited extent on money.msn.com. Some are calculated for you. Gurufocus is also a treasure trove of value statistics that do in fact reach back 10 years. From the Gurufocus site, the historical P/E can be calculated by dividing their figure for ""Earnings per Share"" by the share price at the time.  It looks like their EPS figure is split adjusted, so you'll have to use the split adjusted share price. ""Free cash"", defined in the comments as money held at the end of the year, can be found on the balance sheet as ""Cash, Cash Equivalents, Marketable Securities""; however, the more common term is ""free cash flow"", and its growth rate can be found at the top of the gurufocus financials page." Stock price = Earning per share * P/E Ratio. Most of the time you will see in a listing the Stock price and the P/E ration. The calculation of the EPS is left as an exercise for the student Investor. PEG is Price/Earnings to Growth.  It is calculated as Price/Earnings/Annual EPS Growth.  It represents how good a stock is to buy, factoring in growth of earnings, which P/E does not.  Obviously when PEG is lower, a stock is more undervalued, which means that it is a better buy, and more likely to go up. Additional References: The simple answer is technically bonds don't have earnings, hence no P/E. What I think the OP is really asking how do I compare stock and bond ETFs. Some mature stocks exhibit very similar characteristics to bonds, so at the margin if you are considering investing between 2 such investments that provide stable income in the form of dividends, you might want to use the dividend/price ratio (D/P) of the stock and compare it to the dividend yield of the bond. If you go down to the basics, both the bond and the stock can be considered  the present value of all future expected cashflows. The cash that accrues to the owner of the stock is future dividends and for the bond is the coupon payments. If a company were to pay out 100% of its earnings, then the dividend yield D/P would be conveniently E/P. For a company with P/E of 20 that paid out it's entire earnings, one would expect D/P = 1/20 = 5% This serves as a decent yard stick in the short term ~ 1 year to compare mature stock etfs with stable prospects vs bond funds since the former will have very little expected price growth (think utilities), hence they both compete on the cashflows they throw off to the investor. This comparison stops being useful for stock ETFs with higher growth prospects since expected future cashflows are much more volatile. This comparison is also not valid in the long term since bond ETFs are highly sensitive to the yield curve (interest rate risk) and they can move substantially from where they are now. "The mathematics site, WolframAlpha, provides such data. Here is a link to historic p/e data for Apple. You can chart other companies simply by typing ""p/e code"" into the search box.  For example, ""p/e XOM"" will give you historic p/e data for Exxon. A drop-down list box allows you to select a reporting period : 2 years, 5 years, 10 years, all data.  Below the chart you can read the minimum, maximum, and average p/e for the reporting period in addition to the dates on which the minimum and maximum were applicable." It's safe to say that for mature companies, with profits that have been steady, and steadily growing, that a multiple of earnings can come into play. It's not identical between companies or even industries, but for consumer staples, for instance, you'll see a clustering around a certain P/E.  On the other hand, there are companies like FaceBook, 18 months ago, trading at 20, now at 70 with a 110 P/E. Did the guys valuing the stock simply get it wrong then or is it wrong now?  Contrast this with KO (Coca-cola) a 20 P/E and 3.2% dividend, PG (Proctor and Gamble) 21 P/E, 3% dividend.  Funny though, a $1M valuation for $50K in profit may be Shark ridiculous, but a $1B valuation on a $50M company with great prospects, i.e. a pipeline of new products in growing markets, is a steal.  Disclosure I have no positions in the mentioned stocks. Robert Shiller published US Stock Market data from 1871.  Ken French also has historical data on his website.  Damodaran has a bunch of historical data, here is some historical S&P data. "This is a really interesting question and something a lot of work is being done to understand.  I'm going to look at the closely related question ""Do non market-cap etf weighting methods consistently outperform once you take into account their investment biases?"" Let's use revenue weighting as a reason why investment biases are so important.  In revenue weighting, you would own almost no fast-growing tech companies as they generally have little revenue.   This sounds great if we are talking about say Pets.com in the late 90s but you also would miss most of the rise of Google. To believe in these ETFs consistently outperform (adjusted for risk) you would have to have a strong reason to believe that earnings, sales, or dividends are a better predictor of company value than market value.  Market analysts include the above three metrics and many more when pricing stocks so out-performance using only one of the above metrics seems unlikely. There is one caveat to this and that is value and small cap stocks have been shown to give slightly better risk-adjusted returns in the very long run (see Fama/French) and many of these alternative weighting methods will have a value or small cap bias.  First, it is unclear if this out-performance will continue now that it is more widely known.  Second, even if you believe this will continue you can more easily and cheaply get this bias though value/small-cap etfs than these weighting schemes. In the end, the only thing that is perfectly clear is that higher fee investments will generally under-perform." PEG is Price to Earnings Growth.  I've forgotten how it's calculated, I just remember that a PEG ratio of 1-2 is attractive by Graham & Dodd standards.