Evaluating and Predicting Global Market Dynamics through the PPP–SIRR–SRP Framework: Evidence from Ten Major Stock Markets (February–October 2025)

This study applies the Potential Payback Period (PPP) framework and its derivative measures—the Stock Internal Rate of Return (SIRR) and the Stock Risk Premium (SRP)—to evaluate and predict the behavior of ten major national stock markets as of February 7, 2025. By extending the PPP methodology—originally developed for individual equities—to aggregate market indices, the analysis treats entire national markets as composite “stocks.”Using standardized inputs for each country’s P/E ratio, expected earnings growth rate (g), and discount rate (r), the study computes PPP, SIRR, and SRP values to construct a cross-market valuation hierarchy. These ex-ante estimates are then compared with realized eight-month performance (February–October 2025).Results show a strong positive correlation (ρ ≈ +0.86) between initial SRP levels and subsequent realized returns, confirming the framework’s predictive validity when applied to entire markets. The single major outlier—Brazil—outperformed despite its initially negative SRP, highlighting the model’s sensitivity to real-economy variables, notably unanticipated increases in earnings growth (g) and reductions in the discount rate (r).The findings validate the PPP–SIRR–SRP system as a real-economy-aligned, time-adjusted valuation tool capable of explaining and forecasting cross-market performance based on unified financial principles.