About Shiller P/E Ratio (CAPE)

The Shiller P/E Ratio, also known as the CAPE (Cyclically Adjusted Price-to-Earnings) ratio, was developed by Nobel Prize-winning economist Robert Shiller. Unlike traditional P/E ratios that use a single year's earnings, CAPE smooths out short-term earnings volatility by using average inflation-adjusted earnings over the past 10 years.

This ratio has historically been a reliable indicator of long-term market returns. When the CAPE ratio is high (above 25), subsequent 10-year returns tend to be lower. When it's low (below 15), subsequent returns tend to be higher. The historical median CAPE ratio is around 16-17.

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