Investing - Theory, News & General • Shiller PE seems mostly useless

Unless, of course, you use a posteriori data. i.e., you input a CAPE ratio of 40 during the dot.com boom when the actual a priori CAPE 10 data in 2000 was in the 30s. But, like I said above, that is cheating.

Not sure where you are getting that. You can go to Shiller's own raw data month by month and see that CAPE peaked at 44.2 in December 1999. CAPE remained above 40 through September 2000.

http://www.econ.yale.edu/~shiller/data.htm

Exactly.

If you go to Schiller's website today, a posteriori, you will see 44.2

If you had gone to Schiller's website in December 2000, a priori, CAPE 10 would have been in the 30s.

December 1999's CAPE 10 wouldn't hit the 44 mark until 2003. You had to wait for another year before all of the new audited annual statements covering December 1999 had came out, and another 3 years for the companies to revise these annual statements due to deeply flawed accounting numbers that had been used during this period.

A classic example here is Enron. It reported healthy earnings for 2000. It then restated those earnings as losses in 2001. When Enron restated its earnings Schiller recalculated CAPE 10.

Statistics: Posted by ajonh — Thu Sep 26, 2024 9:07 pm — Replies 209 — Views 15113