PE ratios across different country markets are estimated with long-term interest rate (10 yr rate), the term structure between (10 yr rate and 2 yr rate), a dummy for emerging markets as below:

• P/E = 22.51 - 67.78*(10 year rate) + 96.85*(Term Struc.) 4.83*(Emerging) + e

Using EPS growth rate, payout ratio, and beta estimation, you have within-market estimations of PE for each category of countries as below:

• PE_US = 7.62 + 77.98 g_EPS + 7.67 Payout -5.37 Beta
• PE_Europe = 10.07 + 27.51 g_EPS + 7.78 Payout -5.23 Beta
• PE_Japan = 9.28 + 11.62 g_EPS + 42.29 Payout -4.50 Beta
• PE_Emerging = 5.63 + 13.05 g_EPS + 9.65 Payout + 0.62 Beta

Based on the above estimations, describe the procedure to implement identifying undervalued market and then picking undervalued stocks within the market.