What is the appropriate level of European share prices?

Share prices in Europe have fallen markedly since the second quarter of 2018. We seek to determine the appropriate level of stock market indices in the euro zone, and therefore the current degree of equity market undervaluation. We will therefore analyse: The outlook for earnings per share, given the trend in corporate profitability and the economic cycle; The outlook for the PER (or t he risk premium on equities), given the outlook for interest rates and long-term growth. We then believe that the level of the euro zone’s stock market index is currently 25% too low compared with its normal level.