Shiller PE
The gold standard for long term investors
The Shiller PE is a valuation measure. It is a reliable tool for long term investors. It can help you guiding you your asset allocation.
This website intends to inform and provide an overview of all relevant information surrounding this valuation indicator. I something is missing or incorrect, please let me know by sending an e-mail.
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Cheap or expensive?
The Shiller PE is a valuation indicator for an equity index. It has a reliable track record in determining if the stock market is cheap or expensive.
It works best on long term horizons of 10 years.
Long Term
Investing is hard. It is easier with a long horizon. The Shiller PE helps you with that.
Proven
Academic research shows the reliability of the level of the Shiller PE with future stock returns.
Easy
The concept is easy to understand and straight forward
Short history:
The Shiller PE ratio was developed by professor Robert “Bob” Shiller and popularized during the Dotcom Bubble in the late 90s when he argued that equities were highly overvalued.
The Shiller PE is a variant of the popular price to earning ratio (PE-ratio) and is calculated by dividing the current price of a stock by its average inflation adjusted earning over the last 10 years. Check the interview below; go to 8m30s for his explanation on the Shiller PE.
“Used properly, this metric will guide you to asset allocation decisions that improve your long term returns and lower risk of large portfolio drawdowns.”
— Ken Faulkenberry —
Arbor Investment Planner
https://www.arborinvestmentplanner.com/shiller-pe-10-advantages-criticisms-implementation/
Different name, same concept
There are different names for a similar concept. Look below for a comparison.
Graham & Dodd PE
Price divided by 7 year earnings for a company
Cyclically Adjusted PE (CAPE)
Price divided by 10 year earnings for an index
Shiller PE
Price divided by 10 year earnings for an index – using real (inflation adjusted) numbers