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Based on data provided by Aswath Damodaran, Professor of Finance at NYU, I have created the following world market valuation heat map. Big thanks to Prof. Damodaran for making this data available to the public.

The data is as of January 2011 and includes all publicly traded US firms and all those with a market cap greater than $5 million for non-US firms. Value Line is the source for US data and a combination of Bloomberg and Capital IQ for non-US data.

Countries where data was available for thirty or more firms were ranked by equally weighting Price/Earning, Price/Book and Price/Sales ratios. More specifically, for those wonkishly inclined, the z-score for each metric was used in order in properly weight the possibility of a similar relative metric rank but a significant absolute difference. The color scale runs from dark green (cheapest) to dark red (most expensive).

According to this valuation method Japan and developed Europe appear to be the cheapest markets (no big surprise) with Asia and the big commodity players (Australia and Canada) being the most expensive. The US comes out in about the middle; 36th out of 71 countries ranked. See map below.

World Valuation Heat Map

Unfortunately, I was unable to make the chart larger to view detail but an expanded view of each region can be seen below.

south america stock market valuations
South America
China stock market valuations
Asia
eastern europe stock market valuations
Europe
middle east stock market valuations
Middle East
african countries with stock exchanges
Africa

Using broad sub groupings Japan is the cheapest broad market (not country) with Africa and the Middle East being the most expensive. See table below.

stock market valuation according to p/e ratio by continent
click to enlarge

I plan on following this up with more detail into individual country markets so stay tuned.