5 ms·
I would suggest you read up a bit on Robert Shiller and CAPE
by tslathrow 13y ago
I 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.