This question uses the Cyclically Adjusted Price-Earnings Ratio (CAPE) for the S&P

500 (this measure was popularized by Nobel-prize winning economist Robert Shiller).

It is available at http://www.multpl.com/shiller-pe/. Click on \Table" and \By

Month" underneath the chart to get the historical monthly values (or go directly to

http://www.multpl.com/shiller-pe/table?f=m) .

The CAPE divides the price of the S&P 500 by the last ten year's average of in

ation-

adjusted earnings. In this question we gure out what earnings growth rate was priced

in by the CAPE at dierent historical times, assuming a constant future earnings

growth.

To adjust for the fact that the denominator of the CAPE is not E1 but an average

over the past ten years earnings, we approximate the denominator \E" in the CAPE

with E