On the Performance of Cyclically Adjusted Valuation Measures

18 Pages Posted: 24 Sep 2013 Last revised: 22 Oct 2013

See all articles by Wesley R. Gray

Wesley R. Gray

Alpha Architect; Drexel University - LeBow College of Business

Jack Vogel

Alpha Architect; Villanova University

Date Written: October 21, 2013


We confirm the effectiveness of using cyclically-adjusted valuation metrics to identify high performing stocks. The Shiller P/E, or cyclically-adjusted price-to-earnings (CAPE) ratio, is not the optimal way to implement a cyclically-adjusted value measure. At the margin, the cyclically-adjusted book-to-market (CA-BM) is a better measure to predict returns. We find that more frequent rebalancing and momentum can enhance strategies based on cyclically-adjusted valuation metrics.

Keywords: CAPE, Shiller P/E, long-term valuation metrics, value investing, market efficiency, abnormal returns

JEL Classification: G10, G12, G14

Suggested Citation

Gray, Wesley R. and Vogel, Jack, On the Performance of Cyclically Adjusted Valuation Measures (October 21, 2013). Available at SSRN: https://ssrn.com/abstract=2329948 or http://dx.doi.org/10.2139/ssrn.2329948

Wesley R. Gray (Contact Author)

Alpha Architect ( email )

213 Foxcroft Road
Broomall, PA 19008
United States
7732304727 (Phone)

HOME PAGE: http://https://alphaarchitect.com/

Drexel University - LeBow College of Business ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States

HOME PAGE: http://www.lebow.drexel.edu/corporate-services/corporate-and-executive-education/executive-faculty

Jack Vogel

Alpha Architect ( email )

19 E. Eagle Road
Havertown, PA 19083
United States
215-882-9983 (Phone)

HOME PAGE: http://alphaarchitect.com/

Villanova University ( email )

Villanova, PA 19085
United States

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