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Sam Ro: Robert Shiller Explains How To Use CAPE: Noted

Robert Shiller Explains How To Use CAPE Business Insider

Sam Ro: Robert Shiller Explains How To Use CAPE:

Lately, every stock market watcher has been keeping a close eye on the Robert Shiller's cyclically-adjusted price-earnings (CAPE) ratio. CAPE is calculated by taking the S&P 500 and dividing it by the average of ten years worth of earnings. If the ratio is above the long-term average of around 16x, the stock market is considered expensive. Currently, the CAPE is at 24.42x, which has some people freaked out that the stock market is about to crash.... However, Shiller cautions against using CAPE to time crashes and make short-term trades. Rather, he stresses that CAPE is more useful in predicting longer-term returns...

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