Robert Shiller: UK Stocks are a Great Investment

The Nobel Prize winning economist Robert Shiller said this week that now is a great time to invest in UK equities as valuations are so low

Karen Kwok 21 September, 2016 | 5:23PM
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“I think UK stocks are a great investment,” Robert Shiller the Nobel Price winner economist said this week. “Brexit will not be as bad as everyone fears.”

Professor Shiller explained that because of the expectation of disaster in the markets, the “CAPE” ratio for UK stocks was low – meaning that equities are attractively prices. The CAPE ratio is the Cyclically Adjusted Price-to-Earnings ratio, a measure of discerning a stock’s value which was developed by Shiller and fellow economist John Campbell in 1988. It is widely used as a long term measure of stock market valuation, providing a view on whether the stock is trading over or under the shares’ value.

The ratio is calculated by taking the current inflation-adjusted price of a stock market and dividing it by that market’s inflation-adjusted earnings over 10 years. Averaging the 10 year earnings figure allows the ratio to account for mean return of earnings and long term earnings cycles, resulting in a long term measure of equity market valuation, according to Barclays.

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Karen Kwok

Karen Kwok  is a Reporter for

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