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Shiller P/E Shows Confidence in Profit Outlook: Chart of the Day

Valuations of U.S. stocks relative to 10-year average earnings may be more of a show of confidence than a cause for concern, according to Salil Mehta, an adjunct professor at Georgetown University.

The CHART OF THE DAY compares what’s known as the cyclically adjusted price-earnings ratio, compiled by Yale University Professor Robert Shiller, with profit figures that Mehta highlighted yesterday on his Statistical Ideas blog. The latter is inverted to ease comparisons.