Robert Shiller, Sterling Professor, Yale University and Inventor of the CAPE® Ratio
Tell us what you’re here celebrating today.
We are here celebrating the fifth anniversary of the launch of the Shiller Barclays Cape® ETN. The Shiller Barclays CAPE ETN invests across sectors according to a measure of valuation called the cyclically adjusted price earnings ratio.
Please explain the investment objective.
The index is a value product. Its aim is to find value sectors that are of good value low-priced relative to fundamentals and to shift investing funds into the low value sector so that we can take advantage of the better value parts of the stock market.
A lot of people think the U.S. stock market is expensive but not all parts of the U.S. stock market are – some of them as measured by the CAPE ratio are low priced. So let's invest in America; but let's invest in the better values within America.
How has the index performed over the last 5 years?
Since the launch five years ago the index has gone up in value 25% more than the S&P 500 total return index— that means that if you had invested then you would have 25% more money than if you had put it into a fully diversified stock market investment.
Why did you agree to work with Barclays on this index?
Well way back in 1988, with my student John Campbell, we did a careful statistical analysis of measures evaluation. And we discovered that the CAPE ratio predicts long-term returns very well but we didn't have an investable product, and to actually make it into an investing strategy requires a lot of careful work.
I teamed up with Barclays a little over five years ago to take advantage of the research department that would enable us to really develop this into a solid product.
How did it feel to ring the bell today?
It felt like a very important moment, a big moment. I won't forget it!
Listen to Robert Shiller, Sterling Professor at Yale University explain how to leverage the CAPE® ratio