The Predictive Power Of The Famous Shiller PE Ratio

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		Home Tech Finance Markets Politics Strategy Entertainment Advertising Retail Sports Life Tuesday, January 8, 2013 The Predictive Power Of The Famous Shiller PE Ratio The Shiller PE ratio, or the cyclically-adjusted price-earnings ratio, may be the most respected measure of stock market value. In short, the Shiller PE is the price of the stock market divided by the average of ten years worth of earnings.  If the ratio is above the long-term average, the stock market is considered expensive. Credit Suisse's Andrew Garthwaite compiled the annualized trailing 5-year returns based on certain levels of the Shiller PE.  As expected, the lower the ratio, the better the returns.  But the relationship isn't exactly linear. Here's Garthwaite's chart.  At current elevated levels, the Shiller PE is signaling a period of low returns. Read » Also On Money Game Today: LIVE: Jeff Gundlach Unveils His 2013 Outlook For The Markets And The Economy Alcoa Earnings Come Right In Line But Revenues Beat Expectations Advertisement CHART OF THE DAY: The Elements Of Social Unrest Loom Large Across Europe CHART OF THE DAY: THE SCARIEST JOBS CHART EVER CHART OF THE DAY: 90 Years Of Crises, Correlations, And Stock Market Volatility Share this: Facebook Twitter Digg Reddit StumbleUpon LinkedIn The email address for your subscription is: dwyld.kwu.jobhuntportal11@blogger.com Change Your Email Address | Unsubscribe | Subscribe | Subscribe to the Money Game RSS Feed Business Insider. 257 Park Avenue South, New York, NY 10010 Terms of Service | Privacy Policy

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