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The CAPE Crusaders...Investments that use the CAPE Ratio...Pro's & Con's

beebee
edited April 2018 in The Bullpen
@davidrmoran and many others have mentioned CAPE investing here at MFO. Here's are links to prior CAPE threads conversations here at MFO:
https://mutualfundobserver.com/discuss/search?Search=CAPE

I confess I have not invested using this approach, but I also just tried frog's legs and their quite good!

Pro's:
If the CAPE Ratio can be used to show us where individual pockets of deep value plays exist, then we can purchase shares that are already depressed before a market correction occurs. If one does this, then the stocks stand little chance of going much lower. I do believe that the CAPE Ratio is best used in this manner.
how-to-use-the-cape-ratio-to-double-the-return-of-the-s-and-p-500

Con's:
Like frog's legs...Are there any?

Hussman Study of CAPE:
hussmanfunds.com/rsi/cape.htm

Over the Years Larry Swedroe has written about CAPE.

2014 Article: Swedroe: A Closer Look At CAPE Ratio
The research shows that valuation metrics such as the CAPE 10 explain about 40 percent of real (after inflation) 10-year returns. However, it’s also important to note that the CAPE 10 provides no value forecasting short-term returns. In fact, the correlation with one-year-ahead returns is close to zero.
etf.com/sections/index-investor-corner/21663.html?nopaging=1

2016 Article: Swedroe: CAPE 10 Ratio In Need Of Context
etf.com/sections/index-investor-corner/swedroe-ratio-need-context?nopaging=1

Here's a CAPE calculator (calculates the current number for the last 10 years, but also allows you to calculate a CAPE for any time between 1 month and 50 years.):
https://dqydj.com/shiller-pe-cape-ratio-calculator/

Jeremy Siegel takes a different look at CAPE:
I offer an alternative explanation of the elevated CAPE ratio. The nature of the earnings series that is substituted into the CAPE model has not been consistently calculated for the long period over which Shiller has estimated his
CAPE equations. Changes in accounting practices since 1990 have depressed reported earnings during economic downturns to a much greater degree than in the earlier years of Shiller’s sample. Because the CAPE ratio takes into account the last 10 years of earnings, any stock return forecast issued before 2018 will include the extraordinarily low earnings of 2008–2009 and may be biased downward.
https://dqydj.com/shiller-pe-cape-ratio-calculator/

Shiller's Nobel prize winning work:The 2 Most Important Charts Of The Last Two Decades
Nobel Prize Winner Robert Shiller

Robert Shiller's Updated Data:
econ.yale.edu/~shiller/data.htm

Micheal Kitces diiscussion on CAPE:Should We Forget Shiller CAPE Ratios And Focus On E/P Instead?
should-we-forget-shiller-cape-ratios-and-focus-on-ep-instead/
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