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(10 points) There has (always) been debate among stock-market analysts whether the market is fairly priced or overpriced. One usual metric that they use is

  1. (10 points) There has (always) been debate among stock-market analysts whether the market is fairly priced or overpriced. One usual metric that they use is the CAPE ratio (a.k.a. Shillers PE ratio). Write down the PE ratio formula, and use it to explain (in fewer than three lines) which factors drive PE ratios and how.

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