what is the cape ratio shiller p e ratio 
the cape ratio is a valuation measure that uses real earnings per share eps over a 10 year period to smooth out fluctuations in corporate profits that occur over different periods of a business cycle the cape ratio an acronym for cyclically adjusted price to earnings ratio was popularized by yale university professor robert shiller it is also known as the shiller p e ratio the p e ratio is a valuation metric that measures a stock s price relative to the company s earnings per share eps is a company s profit divided by the outstanding equity shares the cape ratio is generally applied to broad equity indexes to assess whether the market is undervalued or overvalued while it is a popular and widely followed measure several leading industry practitioners have called into question its utility as a predictor of future stock market returns formula for the cape ratio c a p e ratio share price 1 0 year average inflation adjusted earnings cape text ratio frac text share price 10 text year average text inflation text adjusted earnings cape ratio 10 year average inflation adjusted earningsshare price 