In a letter to the editor of The Economist, Jeremy Siegel points out that the earnings series underlying Robert Shiller’s CAPE model has changed over the years. He argues that

• mark-to-market accounting implied increased volatility of reported earnings, in particular during the great recession;
• this leads to an overstatement of the CAPE ratio and underprediction of stock returns.
• “The Shiller CAPE ratio remains the best tool for predicting long-term real stock returns. When a time-consistent series of corporate earnings, such as those published in the national income accounts are used instead of GAAP earnings, not only does the predictive power of the CAPE ratio improve, but the current stockmarket does not appear nearly as overvalued.”

A StarCapital note on another in/consistency issue.