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Stock Prices Adjusted for Inflation

Posted By Barry Ritholtz On June 11, 2006 @ 6:48 am In Data Analysis,Technical Analysis,Valuation | Comments Disabled

In the 100-year Dow Chart post [1] yesterday, the following issue was raised in comments:

It would be nice to see your "100 Year Chart , DJIA" deflated by
some ”inflation” indicator (either consumer price index or wholesale
price index or earnings index or commodities index or real estate
index), or at least in a logarithmic scale.

Indeed it might be even better to see it overlaid with all those indices, to give a sense of perspective as to available macro trend investment choices…

Thormika Keo took up the challenge:  he went to Yale Professor Robert Shiller’s website [2], downloaded Shiller’s data [3] for the Real S&P500, and overlaid it with our periods for for each bull and bear market.

This is what it looks like:

Inflation Adjusted SPX, 100 years, with Bull Bear Cycles

Modifiedshiller_1 [4]

Adjusting for inflation puts the Bull and Bear periods into even sharper relief. It also shows how totally bubblicious the late 1990s were, and why many strategists and technicians started pulling in their horns in the mid-1990s. 

If you want to see this chart in its full 1020 X 554 glory, you can download it here: modifiedshiller.jpg [5]


There is also a CPI adjusted Dogs of the Dow [6], here.


With this post, we add the sub-topic "Valuation" to our list.


UPDATE JUNE 11, 2006 1:54PM

I am out on a sunny Sunday, doing some gardening, washing the car, when I come into to see a cry coming from the crowd: We want Log charts! We want Log charts!

And logarythmic charts ye shall have:

Inflation Adjusted SPX, 100 years, with Bull Bear Cycles (LOG)

Inflation_adj_spx_logarythmic [7]

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2006/06/stock-prices-adjusted-for-inflation/

URLs in this post:

[1] 100-year Dow Chart post: http://bigpicture.typepad.com/comments/2006/06/read_it_here_fi.html

[2] Robert Shiller’s website: http://www.econ.yale.edu/~shiller/

[3] Shiller’s data: http://www.econ.yale.edu/~shiller/data.htm

[4] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/modifiedshiller_1.jpg

[5] modifiedshiller.jpg: http://bigpicture.typepad.com/comments/files/modifiedshiller.jpg

[6] CPI adjusted Dogs of the Dow: http://www.dogsofthedow.com/dow-1925cpi-log.gif

[7] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/inflation_adj_spx_logarythmic.png

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