Name
CAPE Ratios and Long-Term Returns
Date & Time
Tuesday, July 7, 2026, 11:55 AM - 12:20 PM
Description
We demonstrate that 10-year equity market returns are considerably more predictable in relation to price–earnings ratios than previously thought. The traditional approach involves relating the current index price level, based on current index components, to the index earnings of previous years, calculated using those years’ components. When we estimate the cyclically adjusted price–earnings (CAPE) ratio, ensuring that index component prices and earnings are aligned, and apply a superior regression approach, out-of-sample R2 values are over 50%. The Component CAPE ratio weights individual stock CAPE ratios by their market capitalization, whereas the traditional CAPE ratio is more closely aligned with earnings weighting.
Speakers
Keywords
valuation, long-term returns, CAPE, asset allocation
Theme
ASSET PRICING
Author 1
Rui Ma
Author 2
Ben Marshall
Author 3
Nhut Nguyen
Author 4
Nuttawat Visaltanachoti