While some prominent strategists, including Jeremy Grantham and Robert Shiller, have pointed to the 10-year cyclically-adjusted price/earnings ratio (“CAPE”) as evidence that stocks (in particular the S&P 500) are very overvalued, Wharton Professor Jeremy Siegel says there’s a flaw in the metric. The flaw, Siegel said at a TD Ameritrade Institutional conference, involves the 2008 year, [...]
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Tag Archives: 10-year P/E
Is The Market Undervalued Or Overvalued?
December 21, 2011
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The stock market may either be significantly overvalued, or it may be selling near historically low levels — it all depends on whom you’re talking to and what valuation metric they’re using. And in his latest column for Canada’s Globe and Mail, Validea CEO John Reese says that means investors shouldn’t rely on one single [...]
Read moreBearish Case “Short of Substance”, Birinyi Says
October 18, 2011
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Laszlo Birinyi, who warned about financial stocks in the summer of 2008 and turned very bullish on the market not long after it bottomed in 2009, says he isn’t buying the bears’ arguments today. “I think the bearish case is short of substance, the defensive thesis suspect and that selling has been overdone,” Birinyi writes [...]
Read moreStocks Pricey and Risky — But Shouldn’t Be Avoided, Shiller Says
August 30, 2011
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Yale Economist Robert Shiller says he thinks stocks “look highly priced, but not super highly priced”. In an interview with Consuelo Mack on WealthTrack, Shiller says the market’s 10-year price/earnings ratio (which averages earnings over the past ten years) has historically averaged about 15; lately, it’s been around 20. But Shiller says it’s “not too [...]
Read moreZweig: Market Is Cheaper — But Not Cheap
August 10, 2011
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The recent downturn in the stock market has made stocks significantly cheaper than they were before — but they’re not yet “cheap”, according to The Wall Street Journal’s Jason Zweig. “Consider the [valuation] measure preferred by the great investment analyst Benjamin Graham and refined by Yale University economist Robert Shiller, called the ‘cyclically adjusted’ P/E [...]
Read moreWhy The CAPE Ratio Isn’t A Silver Bullet
February 11, 2011
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The “CAPE” Ratio — or Cyclically Adjusted Price/Earnings Ratio — has gained attention in recent years, and many commentators have recently pointed to the ratio as a reason that stocks are overvalued. (The current CAPE of almost 24 is about 50% above the long-term average of about 16.) But is the CAPE level in and [...]
Read more10-Year P/E: Stocks at Fair Value
June 17, 2009
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After years of being overvalued by one of the tougher value metrics — the 10-year P/E ratio made famous by Yale economist Robert Shiller — stocks finally appeared undervalued a few few months back. Now, with stocks having surged some 35% in the past three-plus months, the broader market is back up to “fair value” [...]
Read moreDon’t Be a Bottom-Hunter
March 20, 2009
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The big question in the market these days seems to be, “Have we hit a bottom?” After enduring a bear market that has lasted nearly 18 months and cut the value of the S&P 500 in half, it’s certainly a reasonable question. But in the latest issue of my Validea Hot List newsletter, I explain [...]
Read moreStudy: Stock Prospects “Rosy” for Long Term
January 15, 2009
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Examining historical trends in the 10-year price/earnings ratio, bond yield spreads, and equity risk level premiums, Professors Dale L. Domian and WIlliam Reichenstein make the case that now is a good time to buy stocks ($$) in a research piece published by the American Association of Individual Investors.
Read moreShiller P/E
November 19, 2008
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Fortune’s Shawn Tully recently looked at the Shiller P/E model (developed by Yale University professor Robert Shiller), which calculates the P/E ratio of the market using ten years worth of earnings (vs. just the earnings of the last 12 months). Currently, the market P/E based on the Shiller model is around 15, which is lower [...]
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