The Cape Ratio Weekly is a newsletter devoted to the CAPE Ratio. The latest issue dated October 1, 2013, analyzes whether Buffett, the ultimate value investor, uses the ratio in his investment analysis.
But, first, CAPE Ratio 101...
What is the CAPE ratio? The acronym stands for Cyclically Adjusted Price Earnings Ratio, and is a means to arrive at a valuation of a stock, or a market.
It is calculated by dividing the price by the average of 10 years of inflation-adjusted earnings.
The use of 10-years of earnings data is preferred to one-year data as the latter may be too volatile and not adequately representative of the full earnings picture.
The ratio came...
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