89:
54:
150:
15.21; this corresponds to an average annual return over the next 20 years of around 6.6 per cent. CAPE values above this produce corresponding lower returns, and vice versa. In 2014, Shiller expressed concern that the prevailing CAPE of over 25 was "a level that has been surpassed since 1881 in only three previous periods: the years clustered around 1929, 1999 and 2007. Major market drops followed those peaks" (ref 4). A high CAPE ratio has been linked to the phrase "
179:
earnings in the business is done in the expectation of growing future earnings, and this earnings growth should ideally be accounted for when smoothing earnings over the previous ten years for the purpose of predicting long-term future earnings. This modified measure has been referred to as P-CAPE, or payout and cyclically-adjusted earnings.
118:
concluded that "a long moving average of real earnings helps to forecast future real dividends" which in turn are correlated with returns on stocks. The idea is to take a long-term average of earnings (typically 5 or 10 year) and adjust for inflation to forecast future returns. The long term average
174:
The measure exhibits a significant amount of variation over time, and has been criticized as "not always accurate in signaling market tops or bottoms". One proposed reason for this time variation is that CAPE does not take into account prevailing risk-free interest rates. A common debate is whether
149:
Using market data from both estimated (1881–1956) and actual (1957 onward) earnings reports from the S&P index, Shiller and
Campbell found that the lower the CAPE, the higher the investors' likely return from equities over the following 20 years. The average CAPE value for the 20th century was
187:
Originally derived for the US equity market, the CAPE has since been calculated for 15 other markets. Research by
Norbert Keimling has demonstrated that the same relation between CAPE and future equity returns exists in every equity market so far examined. Research by others has also found CAPE
178:
Recently, investors have sought an improvement to CAPE that reflects the fact that, in general, companies don’t pay out all their earnings as dividends each year. The fraction of earnings not paid out in dividends is either reinvested in the business or paid out via stock buybacks. Reinvesting
166:
However, Shiller's views on what CAPE value is a predictor of poor returns have been criticized as overly pessimistic and based on the original definition of CAPE, which fails to take into account changes in accounting standards in 1990s, which, according to
50:), adjusted for inflation. As such, it is principally used to assess likely future returns from equities over timescales of 10 to 20 years, with higher than average CAPE values implying lower than average long-term annual average returns.
175:
the inverse CAPE ratio should be further divided by the yield on 10 year
Treasuries. This debate regained currency in 2014 as the CAPE ratio reached an all-time high in combination with historically very low rates on 10 year Treasuries.
305:
158:
coined the term in 1996, the CAPE ratio reached an all-time high during the 2000 dot-com bubble. It also reached a historically high level again during the housing bubble up to 2007 before the crash of the
92:
CAPE based on data from economist Robert
Shiller's website, as of 8/4/2015. The 26.45 measure was 93rd percentile, meaning 93% of the time investors paid less for stocks overall relative to earnings.
221:
74:
It is a variant of the more popular price to earning ratio and is calculated by dividing the current price of a stock by its average inflation-adjusted earnings over the last 10 years.
71:
The ratio is used to gauge whether a stock, or group of stocks, is undervalued or overvalued by comparing its current market price to its inflation-adjusted historical earnings record.
77:
Using average earnings over the last decade helps to smooth out the impact of business cycles and other events and gives a better picture of a company's sustainable earning power.
356:
527:, Denis B. Chaves and Tzee-man Chow. King of the Mountain: The Shiller P/E and Macroeconomic Conditions. The Journal of Portfolio Management Fall 2017, 44 (1) 55-68; DOI:
539:
Kenourgios, D., Papathanasiou, S. & Bampili, A.C. On the predictive power of CAPE or
Shiller’s PE ratio: the case of the Greek stock market. Oper Res Int J (2021).
513:
276:
551:
SĂ©bastien Lleo and
William T. Ziemba. Predicting Stock Market Crashes in China. The Journal of Portfolio Management Spring 2018, 44 (5) 125-135; DOI:
123:
of earnings and medium-term business cycles in the general economy and they thought it was a better reflection of a firm's long term earning power.
345:
Johnathan Davis and
Alasdair Nairn (2012). Templeton's Way With Money: Strategies and Philosophy of a Legendary Investor. Wiley, ISBN 1118149610
110:. Graham and Dodd noted one-year earnings were too volatile to offer a good idea of a firm's true earning power. In a 1988 paper economists
191:
It also suggests that comparison of CAPE values can assist in identifying the best markets for future equity returns beyond the US market.
597:
141:. Shiller would share the Nobel Memorial Prize in Economic Sciences in 2013 for his work in the empirical analysis of asset prices.
364:
80:
It is not intended as an indicator of impending market crashes, although high CAPE values have been associated with such events.
702:
137:
Shiller later popularized the 10-year version of Graham and Dodd's P/E as a way to value the stock market as measured by the
188:
ratios are reliable in estimating market returns over five to ten year periods in many international stock markets.
773:
590:
322:
502:
284:
828:
130:
used a method adapted from Graham and Dodd, and somewhat similar to the later
Shiller P/E, but with the
755:
412:
131:
833:
767:
583:
714:
200:
106:
22:
431:
801:
726:
708:
651:
151:
104:
argued for smoothing a firm's earnings over the past five to ten years in their classic text
790:
743:
640:
120:
8:
680:
628:
453:
127:
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equity market. It is defined as price divided by the average of ten years of earnings (
779:
749:
617:
566:
88:
65:
251:
761:
737:
691:
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111:
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Predicting Stock Market
Returns Using the Shiller CAPE, Keimling, N. January 2016
160:
97:
39:
656:
646:
155:
115:
47:
53:
822:
807:
796:
732:
570:
540:
168:
528:
785:
686:
552:
138:
101:
43:
503:
Global Stock Market
Valuation Ratios, Star Capital, Germany, June 2014
720:
696:
662:
386:
674:
575:
479:
668:
454:"P-CAPE: A Better Way for Investors to Estimate Future Returns"
154:" and to Shiller's book of the same name. After Fed President
634:
357:"Global Value: Building Trading Models with the 10 Year CAPE"
306:
Shiller, R The Mystery of Lofty Stock Market Elevations
222:"Super Isas are here - is it the worst time to buy?"
144:
320:
820:
182:
323:"Stock Prices, Earnings and Expected Dividends"
277:"Price to 10 Year Inflation Adjusted Earnings"
246:
244:
242:
219:
591:
64:The ratio was invented by American economist
239:
598:
584:
541:https://doi.org/10.1007/s12351-021-00658-x
480:"Improving Our Favorite Returns Estimator"
354:
529:https://doi.org/10.3905/jpm.2017.44.1.055
87:
60:compared to trailing 12 months P/E ratio
52:
821:
553:https://doi.org/10.3905/jpm.2018.1.078
410:
213:
703:Present value of growth opportunities
623:Cyclically adjusted price-to-earnings
579:
477:
269:
669:Enterprise value/gross cash invested
605:
348:
413:"Don't put faith in CAPE crusaders"
13:
432:"The data point that screams sell"
42:measure usually applied to the US
14:
845:
561:
429:
145:Use in forecasting future returns
171:, produce understated earnings.
774:Risk-adjusted return on capital
545:
533:
518:
507:
496:
471:
446:
423:
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379:
339:
314:
299:
220:Evans, Richard (28 Jun 2014).
16:Stock market valuation measure
1:
411:Siegel, Jeremy (2013-08-19).
355:Faber, Meb (23 August 2012).
206:
183:CAPE for other equity markets
83:
58:S&P 500 shiller P/E ratio
635:Cash return on cash invested
7:
194:
10:
850:
756:Return on capital employed
571:ONLINE DATA ROBERT SHILLER
132:Dow Jones Industrial Index
768:Return on tangible equity
613:
478:Admin, Elm (2024-06-19).
721:Price-earnings to growth
321:Campbell & Shiller.
663:Enterprise value/EBITDA
119:smooths out short term
23:price-to-earnings ratio
675:Enterprise value/sales
93:
61:
152:irrational exuberance
91:
56:
744:Return on net assets
201:Price–earnings ratio
26:, commonly known as
21:cyclically adjusted
829:Valuation (finance)
629:Capitalization rate
417:The Financial Times
802:Sustainable growth
387:"Shiller PE Ratio"
128:Sir John Templeton
94:
62:
816:
815:
750:Return on capital
618:Buffett indicator
567:Robert J. Shiller
107:Security Analysis
66:Robert J. Shiller
841:
834:Financial ratios
762:Return on equity
738:Return on assets
692:Operating margin
607:Financial ratios
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593:
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555:
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543:
537:
531:
525:Robert D. Arnott
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516:
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458:Morningstar, Inc
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363:. Archived from
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283:. Archived from
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126:From the 1940s,
112:John Y. Campbell
96:Value investors
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848:
844:
843:
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840:
839:
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819:
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709:Price/cash flow
652:Dividend payout
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367:on 29 July 2013
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161:great recession
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98:Benjamin Graham
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40:stock valuation
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12:
11:
5:
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791:Short interest
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783:
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765:
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747:
741:
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730:
724:
718:
715:Price-earnings
712:
706:
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689:
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672:
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657:Earnings yield
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647:Dividend cover
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641:Debt-to-equity
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569:'s data page "
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562:External links
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430:Tully, Shawn.
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391:www.multpl.com
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347:
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308:New York Times
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252:"P/E 10 Ratio"
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156:Alan Greenspan
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116:Robert Shiller
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48:moving average
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733:Profit margin
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697:Price-to-book
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681:Loan-to-value
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169:Jeremy Siegel
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487:. Retrieved
484:Elm Partners
483:
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462:. Retrieved
460:. 2024-07-24
457:
448:
436:. Retrieved
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394:. Retrieved
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369:. Retrieved
365:the original
361:MebFaber.com
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329:. Retrieved
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289:. Retrieved
285:the original
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259:. Retrieved
256:Investopedia
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229:. Retrieved
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36:P/E 10 ratio
35:
31:
27:
20:
18:
780:Risk return
727:Price-sales
665:(EV/EBITDA)
310:14 Aug 2014
139:S&P 500
44:S&P 500
32:Shiller P/E
823:Categories
677:(EV/Sales)
631:(Cap Rate)
489:2024-07-30
464:2024-07-30
207:References
121:volatility
102:David Dodd
84:Background
438:23 August
434:. Fortune
396:23 August
331:23 August
671:(EV/GCI)
195:See also
808:Treynor
797:Sortino
776:(RAROC)
637:(CROCI)
38:, is a
786:Sharpe
770:(ROTE)
758:(ROCE)
746:(RONA)
711:(P/CF)
705:(PVGO)
625:(CAPE)
371:4 July
291:4 July
261:4 July
231:4 July
804:(SGR)
793:(SIR)
782:(RRR)
764:(ROE)
752:(ROC)
740:(ROA)
729:(P/S)
723:(PEG)
717:(P/E)
699:(P/B)
687:Omega
683:(LTV)
659:(E/P)
643:(D/E)
326:(PDF)
34:, or
440:2014
398:2014
373:2014
333:2014
293:2014
263:2014
233:2014
114:and
100:and
28:CAPE
19:The
134:.
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235:.
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.
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