based on smoothed real earnings yield of the S&P 500, the US market is currently 95.6% more expensive that it was that day in 1967. Smoothed earnings yield then 4.90% (analogous to a CAPE of 20.4 *before* the drop), smoothed earnings yield now 2.51% (analogous to a CAPE of 39.9).

Considering the changes in how the constituents of the SP500 were selected and the changes to the accounting rules, is there justification or added information for comparing earnings yield from 60 years ago to today.

From the linked article below.

The Index originally contained exactly 425 industrials, 25 railroad, and 50 utility firms. In 1976, 40
financial stocks were added, and the industrial, transportation and utility groups were reduced to
400, 20, and 40, respectively.8 In 1988 Standard and Poor’s eliminated fixed sectors with the goal of
achieving a diversified and representative portfolio of all stocks trading in US markets. In July 2002
all foreign-based companies, which comprised 1.3% of the market capitalization of the index at that
time, were eliminated and replaced by US-based firms.

rodneywhitecenter.wharton.upenn.edu - Wp content

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