The Fair-Value Cape Approach To Explain The Market's Valuation 

Improve the Shiller PE with a fair-value CAPE argues a new research paper from The Vanguard Group The cyclically adjusted price-to-earnings ratio or CAPE ratio was developed by Yale professor of economics Robert Shiller to help give a longer term perspective to valuations. The metric compares current price to average earnings over the past ten years adjusted for inflation and is designed to measure earnings over the course of an entire business cycle. Part of the reason why CAPE is so popular is due to the power of mean reversion. A high CAPE has been associated with below average ten…