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CAPE (aka price-to-ten-year-earnings, PE10[1]) helps devising a rule of thumb for timing. Stocks don't deviate from their expected earnings for long, so when t
by anton_tarasenko 10y ago
CAPE (aka price-to-ten-year-earnings, PE10[1]) helps devising a rule of thumb for timing.
Stocks don't deviate from their expected earnings for long, so when the ratio jumps over the median PE10, the market becomes expensive.
Holding cash during the period of high PE10 and investing it in stocks under low PE10 is a good idea for a person who's saving for retirement and doesn't want to become a professional investor.
[1] https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-e...
- sf_rob 10y agoI found this Vanguard report that considered 15 popular metrics used to predict returns (and 1 control: rainfall). CAPE did indeed perform best, explaining ~43% of variance. I'm not an expert at finance or statistics, but I'm finding it an interesting read. https://personal.vanguard.com/pdf/s338.pdf https://personal.vanguard.com/pdf/s338.pdf
- AnimalMuppet 10y agoWhat is the current value of CAPE/PE10? Where can I find the current value of it?
- ctchocula 10y agoThis webpage seems to have the current value: http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/