Equity to Financial Liabilities Ratio and Annualized Ten-Year Change of Total Equity or Equity Market Price Index

In this paper, I show that the relationship between equity to financial liabilities ratio of Finland, Sweden, Norway, Germany, France, United Kingdom, Spain, Italy, United States and Eurozone and annualized ten-year forward change of total value of equity of the country or corresponding equity market price index is linear and that the ratio has, for most of the countries and indices of this study, high predictive power on the future change of total value of equity or equity market index. I also examine the in-the-sample and out-of-the-sample forecasts of the ratio for every equity market price index and analyze the shape and values of the first integral function of the linear regression line between the ratio and the index.