Summary: Switching with S&P500 Slices

We have applied Professor Shiller’s P/E10 from the S&P500 to all five equity slices available in Gummy’s database. These slices are:
1) Large Cap Growth
2) Large Cap Value
3) Small Cap Growth
4) Small Cap Value
5) the S&P500 itself.
Gummy’s database covers the years 1928-2000. In most cases, their sources are traceable to Fama and French.

In every case, varying stock allocations with Professor Shiller’s P/E10 would have improved 30-year Historical Surviving Withdrawal Rates substantially.
1) Switching allocations improved Large Cap Growth Historical Surviving Withdrawal Rates from 3.8% to 5.1%, a total improvement of 1.3%.
2) Switching allocations improved Large Cap Value Historical Surviving Withdrawal Rates from 4.6% to 6.5%, a total improvement of 1.9%.
3) Switching allocations improved Small Cap Growth Historical Surviving Withdrawal Rates from 4.1% to 5.3%, a total improvement of 1.2%.
4) Switching allocations improved Small Cap Value Historical Surviving Withdrawal Rates from 5.1% to 8.0%, a total improvement of 2.9%.
5) Switching allocations improved the S&P500 itself Historical Surviving Withdrawal Rates from 4.1% to 5.3%, a total improvement of 1.2%.

Professor Shiller’s P/E10 measure of stock valuations tells us about the market as a whole. It is applicable to wide segments of the market. It is most useful with Value stocks.

Have fun.

John Walter Russell
From February 2, 2005