No. of Recommendations: 8
This Stock Market May Not Be That Overpriced After All
barrons.com - Stock market not overpriced capesource of new study -
researchaffiliates.com - Current constituents capeamend CAPE with “Current Constituents CAPE" to remove "constituent elimination" bias, this stock market, although still expansive, may not be that overpriced after all (relative to 2000).
... CAPE becomes flawed when a stock is deleted from the index and replaced by a new one. That’s because the deleted stock’s earnings will remain part of the traditional CAPE’s calculation for 10 years after its deletion, and only gradually will the replacement stock’s earnings be included.
... the researchers found that the CC-CAPE had a better track record over the 1964-2024 period when forecasting the stock market’s return over each of the subsequent one-, three-, five-, and 10-year periods.
The moral - There are always many biases in simple measures. Don't just blindly adopt.
