The Cyclically Adjusted Price to Earnings Ratio, also known as CAPE or the Shiller PE Ratio, is a measurement conceived by Robert Shiller which adjusts past company earnings by inflation to present a snapshot of stock market affordability at a given point in time. On this page is a Shiller PE ratio which 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. You can export your work in CSV format and take this data to your favorite spreadsheet or stats program for further research.
We also have calculators for returns on the S&P 500 (with dividends reinvested) or 10 Year Treasuries (with coupons reinvested).
The Shiller PE
Robert Shiller first proposed a ten year timeframe for his CAPE ratio, targeting it towards the S&P 500 – the most well known American stock index. Subsequently, it has been adapted for a number of other countries and indexes, as you can see in this post we did a while back.
The Shiller PE is a valuation measure, much like its cousin the price to earnings ratio. However, the Shiller PE tries to work around the shortcomings of the current PE ratio – either inappropriate earnings or over or undervaluation – by averaging results over a longer time frame. That means neither temporary dips in earnings (for example during the Great Recession) nor investor over-optimism (say, during the Tech Bubble) or over-pessimism will be inappropriately weighted in a holistic view of the market.
We first discussed the Shiller PE ratio in 2013, but suffice to say it’s a long term valuation metric which, even when running ‘hot’, may take many years to find balance again – that is, if it ever finds balance. Additionally, as it is a ratio, it suffers from a few effects inherent to… well, math. Small numbers in the denominator increase the sensitivity – so prolonged periods of lowered or higher earnings have large effects (unless, of course, those earnings are the ‘new normal’).
At a glance, you aren’t able to directly tell if prices or earnings are dominating – but the coarseness of the measurement is its strength – by removing your ability to justify a valuation, it forces you to consider what a high or a low number means. Since all numbers are additionally adjusted by averaging over a timeframe, strange periodic effects of the two inputs hopefully will balance out over the timeframe you have chosen.
In other words, it’s not as clumsy or as random as other valuations like the 12 month P/E – it’s a more elegant valuation measure for a more civilized investor.
Sources of the Shiller PE and CAPE Ratio Calculator
Thank you to Robert Shiller, for providing his monthly data on the S&P 500. Please see his site for an explanation of the calculation of the ratio. The only caveat is that all data internal to the tool is monthly, while earnings data is quarterly. Earnings data will lag the published dates – in those cases we ‘carry forward’ the last known earnings.
The methodology on the calculator itself is the same as listed on our other S&P 500 calculators – (technically, it even uses the exact same data file they are pointing to!). That link will show the most recent month’s notes.
Other Calculators With S&P 500 Data You May Enjoy:
- S&P 500 Returns (with dividends reinvested)
- 10 Year Treasuries (with coupons reinvested)
- S&P 500 Periodic Reinvestment Calculator (Reinvestments, taxes, fees, and capital gains)