top of page

This page lists most research about the Shiller PE. A management summary helps you to navigate.

Graham, B and D. Dodd (1934) - Security Analysis
This classic work mentions the use of an average first. In the book, 
the P/E ratio is considered to be a crucial measure to value a company, but they had a problem with it. They realized that a few months, or even a year, of financial information could be deeply misleading. It could say more about what the economy happened to be doing at any one moment than about a company’s long-term prospects. So they argued that P/E ratios should not be based on only one year’s worth of earnings. It is much better, they wrote in “Security Analysis,” to look at profits for “not less than five years, preferably seven or ten years.” It looks like this measure of value was lost to history.

"But at least two economists have remembered the advice. For years, John Y. Campbell and Robert J. Shiller have been calculating long-term P/E ratios. When they were invited to a make a presentation to Alan Greenspan in 1996, they used the statistic to argue that stocks were badly overvalued. A few days later, Mr. Greenspan touched off a brief worldwide sell-off by wondering aloud whether “irrational exuberance” was infecting the markets. In 2000, not long before the market began its real swoon, Mr. Shiller published a book that used Mr. Greenspan’s phrase as its title."
Source: New York Times


Shiller, Robert (1996) - Price–Earnings Ratios as Forecasters of Returns: The Stock Market Outlook in 1996
This publicatie was next in line - to our knowledge - after Security Analysis. Robert Shiller shows with plain and simple regression analysis the value of the then still called: Graham & Dodd PE. In his paper he correctly refers to Graham en Dodd:"As long ago as 1934, Benjamin Graham and David Dodd, in their now famous textbook Security Analysis, said that for purposes of examining such ratios, one should use an average of earnings of "not less than five years, preferably seven or ten years."

Three similar concepts

  • Cyclically Adjusted PE (CAPE) is similar to the Graham & Dodd PE.

  • The Shiller PE is slightly different: instead of using nominal prices and earnings, Shiller uses real prices and earnings.

bottom of page