Shiller's long-term equity forecasting model is based on his cyclically adjusted price-to-earnings ratio, known as the CAPE ratio or the Shiller P/E. The CAPE ratio looks at earnings from the past 10 years and adjusts them for inflation. It then divides the current market price by the average of the inflation-adjusted earnings. The indicator effectively smooths out the impact of the market's cycles, providing a clearer picture of where valuations stand in a historical context. However, he suggests that it c ...