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REDDIT

Fixing the CAPE Ratio - Does Liquidity Matter?

B
Jan 3, 2026 · 16:03

The way that CAPE currently works, trailing earnings are adjusted for inflation to match the purchasing power of today. ***I think i can make a compelling case that liquidity would be a better adjustment.***

If that were the case, then stocks were actually much cheaper in 2021 than initially thought. Unfortunately, stocks are still expensive today by this metric.

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