Simon Black has an interesting article about whether the Singapore market is relatively "cheap" at roughly 1/1 Market cap/GDP. While this seems superficially like a decent measure, it falls down upon closer analysis.

1. GDP is a flawed yardstick; you should subtract rather than add government spending. Use Mark Skousen's Gross Output measure where you can.
2. Single indices do not necessarily reflect the total output of a country, but neither do aggregate measures like GDP/GO. A more thorough analysis would divide up the gross output by that covered by the relevant market sector(s) represented by the index you look at.
3. Using indices, while good from a hedging against Macro trends POV, is never gonna net you the large gains you can get from value investing in individual firms. To use this approach with individual firms, you would need to further subdivide your analysis into 'how much of a share of output does this firm represent versus their market cap?' Doing so you can actually make a pretty good spreadsheet and sort from top to bottom as to "who are the winners and losers" in the overvalued/undervalued game.

Real investing takes careful planning and thought, not buying indexes and wishing. But doing the homework isn't really that hard if you know what statistics to look for. Like in Moneyball, the game can be won if you look at the right parameters. For value investors, overvalued/undervalued is the most important parameter.

Of course, other relevant statistics exist; nobody would buy a heavily undervalued buggy whip maker in 1912 (except to strip the assets and liquidate it). Earning potential and more traditional measures like P/E should influence your winnowing past 'undervalued or overvalued'.