What is a good Excess CAPE Yield?

The Excess CAPE Yield has averaged roughly 3 to 4 percentage points since the 1960s. Readings near zero or negative mean stocks offer little or no premium over bonds — historically expensive territory — while readings above ~5 points have marked attractive entry points.

Why did Shiller create the Excess CAPE Yield?

Robert Shiller introduced it to answer the most common criticism of his own CAPE ratio: that it ignores interest rates. A CAPE of 35 can be reasonable when bonds yield nothing and expensive when real yields are 3% — ECY captures that difference in a single number.

Can ECY and CAPE disagree?

They can. In 2021, for example, raw CAPE was near record highs while ECY sat close to its historical average, because real bond yields were deeply negative. When the two disagree, interest rates are the reason — which is exactly the information ECY adds.

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Excess CAPE Yield

Stock earnings yield minus the real bond yield.

1.27pp

Fair Value

As of July 9, 2026

The Excess CAPE Yield is 1.27pp as of July 9, 2026 — 0.9 standard deviations below its historical mean of 3.43, a Fair Value reading.

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Historical crashes marked on this chart (6)

The dashed red lines flag major US market crashes within this indicator’s history. Here is what happened at each and what followed.

Kennedy Slide (1962): A rapid spring 1962 sell-off (the 'Flash Crash of 1962') wiped roughly 27% off the S&P 500 amid fears over the economy and a clash with steelmakers. Markets stabilized and recovered within about a year.
1973–74 oil crisis bear market (1973): The OPEC oil embargo, Watergate, and stagflation drove a roughly 48% decline over nearly two years — the worst bear market since the 1930s. Stocks took years to recover in real terms.
Black Monday (1987): On October 19, 1987 the Dow fell 22.6% in a single day — the worst one-day drop in history — driven partly by program trading. The economy avoided recession and markets recovered within two years.
Dot-com crash (2000): The tech bubble burst in March 2000; the Nasdaq lost about 78% by 2002 as internet valuations collapsed. A mild recession followed and tech stocks took roughly 15 years to reclaim their peak.
Global Financial Crisis (2008): The subprime mortgage meltdown and Lehman Brothers' collapse cut the S&P 500 about 57% into March 2009. It triggered the Great Recession, sweeping bailouts, and a decade of near-zero interest rates.
COVID crash (2020): Pandemic lockdowns caused the fastest bear market ever in February–March 2020, a roughly 34% plunge in weeks. Unprecedented Fed and fiscal stimulus sparked a rapid recovery to new highs.

Overview

The Excess CAPE Yield (ECY) is Robert Shiller’s answer to the most common criticism of his own Shiller CAPE ratio — that it ignores interest rates. It flips CAPE into an earnings yield (100 ÷ CAPE) and subtracts the real 10-year Treasury yield, measuring the extra return stocks offer over the bond alternative. When rates are near zero, a high CAPE can still leave stocks attractive relative to bonds; when real yields are high, the same CAPE is far more dangerous. ECY has averaged roughly 3–4 percentage points since the 1960s, fell near zero before the 2000 dot-com peak, and stayed healthy through 2021 even as raw CAPE approached record highs.

How to read it

ECY is the premium stocks offer over bonds. Around 3–4 percentage points is normal. Near zero or negative means equities are priced to return little more than bonds — the expensive end, so this gauge is inverted: low readings register as overvalued. High readings (5+ points) mean stocks are cheap relative to the bond alternative, as they were after 2009.

How it's calculated

Invert the Shiller CAPE ratio to get the cyclically adjusted earnings yield: 100 ÷ CAPE, in percent.
Compute the real 10-year Treasury yield: the nominal 10-year constant-maturity yield minus trailing 10-year annualized CPI inflation (Shiller’s proxy for expected inflation).
Subtract the real yield from the earnings yield. The result is compared against its own long-run mean with standard-deviation bands; unusually low readings register as overvalued.

Criticisms

Trailing 10-year inflation is a backward-looking proxy for the expected inflation that actually matters to bond buyers.
A high ECY can reflect distressed bond markets rather than cheap stocks — it is a relative measure, not an absolute one.

Frequently asked questions

What is a good Excess CAPE Yield?: The Excess CAPE Yield has averaged roughly 3 to 4 percentage points since the 1960s. Readings near zero or negative mean stocks offer little or no premium over bonds — historically expensive territory — while readings above ~5 points have marked attractive entry points.
Why did Shiller create the Excess CAPE Yield?: Robert Shiller introduced it to answer the most common criticism of his own CAPE ratio: that it ignores interest rates. A CAPE of 35 can be reasonable when bonds yield nothing and expensive when real yields are 3% — ECY captures that difference in a single number.
Can ECY and CAPE disagree?: They can. In 2021, for example, raw CAPE was near record highs while ECY sat close to its historical average, because real bond yields were deeply negative. When the two disagree, interest rates are the reason — which is exactly the information ECY adds.