Prof. Robert Shiller of Yale University invented the Shiller PE Ratio to measure the market's valuation. The Shiller PE is a more reasonable market valuation indicator than the PE ratio because it eliminates fluctuation of the ratio caused by the variation of profit margins during business cycles. This is similar to [market valuation based on the ratio of total market cap over GDP](https://www.gurufocus.com/stock-market-valuations.php), where the variation of profit margins does not play a role either. https://www.multpl.com/shiller-pe Price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10 **Why Is the Regular PE Ratio Deceiving?** The regular PE uses the ratio of the S&P 500 index over the trailing-12-month earnings of S&P 500 companies. During economic expansions, companies have high profit margins and earnings. The PE ratio then becomes artificially low due to higher earnings. During recessions, profit margins are low and earnings are low. Then the regular PE ratio becomes higher.