Another take on Shiller’s PE10
A modified S&P 500 valuation model based on Shiller’s PE10 data agrees with the original model that “stocks are currently at valuation levels that historically have proven to be quite attractive.”
The modified PE10 model, described in an article on Minyanville, takes into account additional variables like real and nominal interest rates, economic volatility, GDP growth, debt levels, book values and more.
It has also been simplified to offer what the author calls an intuitive “road map” that people can relate to:
In addition to identifying several historical valuation ranges - ranging from “irrational exuberance” to “irrational despondency” - the model translates the entire history of stock market valuations in terms of current price levels for the S&P 500. The end result makes for an interesting perspective and is well worth a look.
Related posts:
Shiller: The market hasn’t been this cheap in decades
Online stock returns predictor based on Shiller’s P/E10
Market’s long-term rewards potentially “staggering”
