The CAPE10 index is based on the Price/Earnings (P/E) ratios of stocks. We will examine the P/E ratios. The data file cape10-2017.xlsx gives dates, various economic variables, CAPE10 values, prices, earnings, etc.

Split the data into two periods: 18811989 and 1990 & after. For each period, Compute the P/E values. Would you judge that a Normal model would be appropriate for the P/E values? Explain and show the plots you made (note that, you can use StatCrunch on MyLab to make histogram and normal probability plot). Now, consider the more recent P/E values (1990 & after). Convert the P/E values to z-scores. In what year(s), if any, the P/E values have been extreme? Explain