Wall Street Oasis - Investment Banking & Finance Community: Is Shiller P/E Worth It?

Wall Street Oasis - Investment Banking & Finance Community The Wall Street Finance Community where investment bankers, consultants, traders, private equity and hedge fund professionals come to learn and play.

Is Shiller P/E Worth It? May 27th 2013, 23:30 The Shiller P/E has been in the news lately (1, 2, 3) as various critics and proponents say say that the high level (~24 vs 17.5 average in the last century) is either indicative of danger or not applicable in this case. To review: the Shiller P/E is the 10 year inflation adjusted trailing P/E of the S&P 500. Also called the cyclically adjusted price-to-earnings ratio, the ratio is meant to smooth the volatile earnings of the business cycle and generate a genuine measure of value for the market. After reading AQR's paper extolling the use of Shiller P/E (10 yr trailing P/E) while acknowledging its limitations, I am tempted to ask the question - is Shiller P/E even worth it as a tool? read more Media files: preview (image/png, 0 MB)

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