In a wide-ranging conversation with DoubleLine Capital CIO Jeffrey Sherman at the Wealth Management EDGE conference on Wednesday, Shiller addressed the current state of the widely-followed cyclically adjusted price-earnings (CAPE) ratio for the S&P 500.1
“It has come down into the low 30s,” he said. “It kind of puts us where we were in other times in history that were relatively extreme.”
“But you know, the stock market has performed very well over the last 100 years,” he added. “I like to look at long-term time horizons. And so when it's highly priced, it doesn't necessarily make it a horrible investment.”2
— Nobel Prize-winning economist Robert Shiller is not particularly alarmed by what some market watchers argue are troublingly high valuations in the stock market. “It has come down into the low 30s,” he said. “It kind of puts us where we were in other times in history that were relatively extreme.”
What Does the Shiller PE Tell You? The Shiller P/E gives investors a read on whether the stock market—as represented by the S&P 500—is overvalued or undervalued. The higher the Shiller P/E ratio, the more overvalued a market.
Hansen and Robert J. Shiller, was awarded the 2013 Nobel Prize for Economics for his contributions to the development of the efficient-market hypothesis and the empirical analysis of asset prices.
The main advantage of the Shiller PE ratio is that it eliminates the fluctuations in the regular PE ratio caused by variations in profit margins during business cycles. The regular PE uses the trailing 12 months earnings per share (EPS).
Hobby: Flower arranging, Yo-yoing, Tai chi, Rowing, Macrame, Urban exploration, Knife making
Introduction: My name is Madonna Wisozk, I am a attractive, healthy, thoughtful, faithful, open, vivacious, zany person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
