Price to 10 Year Inflation Adjusted Earnings
Popularized by Robert Shiller, this ratio avoids the problems of volatile earnings in the P/E ratio by averaging the inflation adjusted earnings of the last 10 years. It is calculated using the following method.
- Adjust each of the yearly earnings of the last 10 years for inflation.
- Averaging the result of the step 1.
- Divide the current price by the result of step 2.
Source: Standard and Poor's and Robert Shiller