lizgdal wrote: There was a major accounting change around 1991, and so I double the Shiller CAPE values before 1991 when doing historical comparisons.

Wendy wrote: Please post a link to this information.

No links, just an observation after looking at the CAPE data. The data shows a break around 1992, and there were various FASB accounting changes around that time.

A thought experiment: were new investors better off in 1929 or 1999? CAPE says the 1999 bubble was far worse, but the returns after the bubbles burst were far worse in 1929. Was this just random luck, or does CAPE need an adjustment?

Total returns for the S&P 500 index equivalent, for the 10 years following peak CAPE dates:

CAGR  TR   GSD  MDD    From    CAPE      To     CAPE   ratioCAPE
 -5   -37  45   -85  19290913  32.56  19390915  16.45     51%
 -1   -5   21   -55  19991215  44.20  20091215  20.32     46%
 
                       ratio   1.36             1.24

CAPE was 36% higher in 1999 compared to 1929, and yet subsequent 10-year total return was -37% following 1929, and -5% following 1999. In both cases, CAPE values fell, but 10 years after the bubbles burst the 2009 CAPE was still 24% higher than the 1939 CAPE.

The 1930's stock market was much more volatile than the 2000's stock market. Maximum drawdown in the 1930's was 85%, while maximum drawdown in the 2000's was -55%. Both unpleasant, but the 1930's were clearly worse. Why doesn't the CAPE reflect this?

Recovery time was longer following the 1929 crash. Using Shiller's CAPE data, the time to recover after Real TR Price peaks:

         Real TR
  Date    Price
1929.09   12655
1945.10   12684
  16.0    years   recovery
 
2000.08  1207059
2013.05  1256426
  13.0    years   recovery

From a M* article:

Rank  %Decline   Peak   Trough  Recovery                          Event
  1      79     Aug-29  May-32   Nov-36               1929 Crash & Great Depression
  5      50     Feb-37  Mar-38   Feb-45                 Great Depression & WWII
 
  2      54     Aug-00  Feb-09   May-13   Lost Decade (Dot-Com Bust & Global Financial Crisis)
 
  3      52     Dec-72  Sep-74   Jun-83             Inflation, Vietnam, & Watergate
  4      51     Jun-11  Dec-20   Dec-24                     WWI & Influenza
  6      37     May-46  Feb-48   Oct-50                   Postwar Bear Market
  7      36     Nov-68  Jun-70   Nov-72                 Inflationary Bear Market
  8      34     Jan-06  Oct-07   Aug-08                       Panic of 1907

link has a chart of Market Crash Timeline: Growth of $1
from morningstar.com - What weve learned years stock market crashes