Shiller Cyclically Adjusted PE Ratio (CAPE)

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The following is a scatterplot of CAPE using historical data downloaded from Quandl.

This particular PE ratio was invented by Nobel Prize-winning economist Robert Shiller of Yale University.

CAPE uses a rolling ten-year earnings period. This smooths out fluctuations based on temporary psychological, geopolitical, and commodity-linked factors that should not bear on fundamental valuation.

The second feature is that it is backward-looking only. This eliminates the rosy scenario forward-looking earnings projections favored by Wall Street.

The third feature is that relevant data is available back to 1870, which allows for robust historical comparisons.

Current CAPE = 29.75 is 79% from long-term average.

Record: max= 44.19 ; min= 4.78 ; mean= 16.63

The plot is produced by R, and will be updated on a quarterly basis.

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