CAPE Formula:
- Adjust each of the yearly earnings of the last 10 years for inflation.
- Average the result of the step 1.
- Divide the current price by the result of step 2.
When I say yearly earnings I really mean trailing twelve months. Use TIPS etc to adjust for inflation.
CAPE is mostly horseshit but basically it's designed to give a sense of over/undervaluation of risky assets
It's about as awful as any other valuation metric though.
