Fed model

From Wikipedia, the free encyclopedia

The "Fed model" is a theory of equity valuation thought to be used by the Federal Reserve that hypothesizes a relationship between long-term treasury notes and the market return of equities. According to this valuation model, the yield on the 10-year U.S. Treasury Bonds should be similar to the S&P 500 earnings yield. Differences in these returns identify an over-priced or under-priced securities market.

[edit] External link

• The "FED Model" theory of equity valuation- A blog discussion of the "Fed model" and how to apply it to the S&P 500 index.