Robert J. Shiller recently shared the 2013 Nobel Prize in Economic Sciences with Eugene F. Fama and Lars Peter Hansen for research on how financial markets work and how stocks are priced.

Mr. Shiller has come up with his own P/E ratio to measure fair value versus current value using his modified version of a price-to-earnings ratio. According to Wikipedia, The cyclically adjusted price-to-earnings ratio, commonly known as CAPE or Shiller P/E, is a valuation measure usually applied to broad equity markets. It is defined as price divided by the average of ten years of earnings, adjusted for inflation.

The Nobel winner, Shiller has used his research to warn investors about the tech bubble in the early 2000s and the recent subprime meltdown.  Investors might be wondering where in the world can they find value and where the US market stands.

On October 7, 2013, Wellershoff & Partners Ltd, Chief Investment Officer, Joachim Klement published a paper titled  What the Shiller PE says about global equity markets — Update 2013.

The report updates analysis of expected returns for equity markets around the world. Based on the current Shiller-PE ratios of 38 developed and emerging equity markets around the world, our findings indicate that expected real returns are still positive for the coming five to ten years. European stock markets remain the most attractively valued, while the US stock market is among the most overvalued. We anticipate that expected real returns for US stocks over the coming five to ten years should be in the order of 2% to 2.5% per annum, while European equity markets may see real returns in the high single digits. At the same time, we note that rising interest rates could undercut expected returns.

Alarmingly, Klement  wrote, The S&P is up prices rose so much that the Shiller-PE in the United States went from rather fair levels at the end of the financial crisis to levels that are currently around 68% above the fair Shiller-PE. Long-term valuations in the United Stock market are today amongst most expensive valuations ever recorded.

The S&P 500 has tacked on another 3.85% since the seventh. The most expensive valuations ever recorded are even more expensive today.

You might be wondering where in the world you might be able to find value today – well, at least as of October 7 th.

We’ve put the following table of undervalued equity markets according to Klement, as of October 7, 2013. For your convenience, we added the corresponding ETF symbol.