Investors often look for signals indicating whether it’s a good time to get into or out of the market. Market valuation measures, such as the cyclically adjusted price-to-earnings (CAPE) ratio(1) of Campbell and Shiller (1998), are frequently portrayed as indicators to assess whether the stock market’s expected return has increased or decreased. Despite the attention market valuation measures continue to receive, we do not observe compelling evidence these indicators are useful for investors’ asset allocation decisions. WHAT’S IN A VALUATION
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