The earning yield is quoted as a percentage, and therefore allows immediate comparison to prevailing long-term interest rates (e.g. the Fed model).
The market price of stocks may increase or decrease, reflecting the additional risk involved in equity investments.
The Fed model is an example of a system that uses the earnings yield as a method to assess aggregate stock market valuation levels, although it is disputed.
[2] Earning yield is one of the factors discussed in Joel Greenblatt's The Little Book That Beats the Market.
However, Greenblatt uses an adjusted earning yield formula to account for the fact that different companies have different debt levels and tax rates.