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I'm not sure we've waiting long enough for Shiller to be proved correct. If monetary policy wasn't blowing the roof out on equity valuations, we'd be seeing me
by tslathrow 13y ago
I'm not sure we've waiting long enough for Shiller to be proved correct.
If monetary policy wasn't blowing the roof out on equity valuations, we'd be seeing mean-reversion as we should.
- saym 13y agoCan you elaborate on his prediction?
- tslathrow 13y agoI would suggest you read up a bit on Robert Shiller and CAPE
- fiatjaf 13y agoThanks for the elaboration and useful links.
- tslathrow 13y agoI assumed you could just look in any introductory finance textbook, but here: CAPE Formula: - Adjust each of the yearly earnings of the last 10 years for inflation. - Average the result of the step 1. - Divide the current price by the result of step 2. When I say yearly earnings I really mean trailing twelve months. Use TIPS etc to adjust for inflation. CAPE is mostly horseshit but basically it's designed to give a sense of over/undervaluation of risky assets It's about as awful as any other valuation metric though.