Popular Stock Market Valuation Tool’s Indication of Pending Gloom is Challenged

The Wall Street Journal reported that the market valuation metric developed by the economist who predicted the housing bubble and the stock market collapse of the early 2000s is now at a high not seen since 2007, prior to the financial crisis. The measure developed by Nobel Prize-winner Robert Shiller currently indicates that stocks are highly expensive. However, an alternative measure is casting doubt on whether the market outlook is as gloomy as Shiller’s methodology projects.  The Wall Street Journal observed that revisions to Generally Accepted Accounting Principles in 1993 and 2001 may be skewing the Shiller data, causing company earnings to appear lower and noted that when a more consistent earnings measure was used with the same methodology, stocks appeared much cheaper than Shiller’s data suggested.