The Test Bench › gate

Does Excess CAPE Yield (as a timing signal) actually work?

DEAD

No edge left once tested on a fair footing.

The claim

Excess CAPE Yield tells you when to be in or out of the market — Valuation timers

What we did

Tested against Buy & hold the S&P, modern 1997-2026 daily + Shiller 1920-2023 monthly, OOS, null-floor controlled.

The result

Result: +0.06 in/out edge (vs +0.41 floor); noise in both eras

+0.06 in/out edge (vs +0.41 floor); noise in both eras

Verdict

The single best long-run return FORECASTER on the bench -- the Excess CAPE Yield predicts the forward DECADE at +0.60 correlation. But as an in/out timing signal it is noise, in the modern era and across 100 years of Shiller data. Valuation tells you what to EXPECT, never WHEN. A market can stay expensive for a decade; going to cash because the premium is thin means sitting out the bull.

What the test did and did not do

survivorship-free universe
net of real costs
tested out of sample
point-in-time data
checked for look-ahead

Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.

Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.

← Equity Risk Premium / Fed model (as a timing signal) All findings FedHike<50%(long) →

Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.