Ode To Capitalism

“Nobody can tell you for sure what’s going to happen next in the stock market. But thanks to the nice data set collected and maintained by Yale Professor Robert Shiller we can speak with authority about what it’s been doing for the last 140 years.”

-Via James D. Hamilton – Professor of Economics at the University of California, San Diego

“Figure 1. Green line: Ratio of real value (in 2010 dollars) of S&P composite index to the arithmetic average value of real earnings over the previous decade, January 1880 to Aug 2010. Red line: historical average (16). Data source: Robert Shiller.”

“Figure 2. Green line: Ratio of real value (in 2010 dollars) of S&P composite index to the arithmetic average value of real earnings over the previous decade, January 1880 to Aug 2010. Red line: historical average (16). Blue line: average compounded nominal rate of return on stocks purchased at the indicated date and held for ten years from that date. Data source: Robert Shiller.”

“Figure 3. Black line: Ratio of nominal dividend paid on aggregate stock index two months earlier to current nominal stock price index. Orange line: yield on 10-year bond. Data source: Robert Shiller.”

Read the full story and find more charts on Econbrowser: Long-term perspective on the stock market.

Tags: Business, Investing, P/E ratio, Rate of return, Research and Analysis, Robert Shiller, Stock Market, United States