Is Shiller P/E Worth It?
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interesting post. thanks for sharing!
Very interesting....will try to read more about why some consider it not applicable in this case, although I can see why. We are in a unique place right now, not a good one but not a bad one (yet) either. Will be interesting to see if this holds true. Hopefully not.
Theory of Relativity. In this case, bonds and alternative assets relative to stocks.
So, in this case, you're saying that due to the performance we're seeing from alternative categories at this point in time, this 24.xx level isn't relatively dangerous right now?
It'll be useful for calling tops (bottoms) when everyone thinks it's useful for calling tops (bottoms). Because that's when everyone will react to it, creating the top (bottom) in itself.
Asness wrote it shouldn't be used as a tactical trading tool, but as a tool to use for structuring your portfolio going forward. I think there's a lot of evidence to support the predictive power of the Shiller P/E.
Difficult to look at indicators like Shiller CAPE, Citi economic surprise index, etc. (even company earnings), when central banks are using unprecedented policy worldwide..making common alternatives to equities unattractive.
What happens when you do actually take in to account Shiller's P/E assumptions? What are these assumptions? Is looking at track records like this not a dangerous game anyway. I still don't fully understand the role of these tools in decision making.
I was talking to a trader who uses purely technical analysis recently and the main reason for this seemed to be that a lot of these tools and statistics have self-fulfilling properties, as ytinifni said. Does this work of fundamentals or rely purely on market trends?
Concluding it's usefulness with respect to history and track record seems to be a bad way to look at it, no?
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