Classic investor frameworks · Cycle context
Robert Shiller · CAPE
Uses long-term inflation-adjusted average earnings to smooth cycles and assess market or sector valuation context.
- Guide level
- Practical
- Output
- Cycle context
Core formula
CAPE = current price / ten-year average real earningsHow to interpret it
Uses long-term inflation-adjusted average earnings to smooth cycles and assess market or sector valuation context.
The output should be read as a scenario or decision aid, not as a guaranteed price target. Compare it with at least one method based on different economic assumptions.
Practical workflow
- Normalize the latest public financial and operating data.
- Choose assumptions that match the company's economics and accounting structure.
- Calculate conservative, base and optimistic cases where the method permits.
- Compare the result with market pricing and an independent valuation method.
- Document the assumptions that drive the largest changes in value.
Key limitation
CAPE is weak for short-term timing and accounting or structural changes impair historical comparisons.
How Stockinsky uses it
Stockinsky uses this framework only when the company type and available data support it. Professional valuations expose assumptions, sources and warnings instead of presenting false precision.