Shiller calculates the price-earnings ratio of the S&P 500 using "smoothed" earnings—specifically, a 10-year moving average. As described in a previous piece, the volatility of earnings on a year-to-year basis renders the price-earnings ratio based on any one year misleading (or, at least, less relevant from a valuation perspective). Right now, for example, corporate profits are higher as a percentage of revenue than they have been in decades. As a result, a P/E ratio based on this year's earnings is lower than it would be based on an average level of corporate earnings, making the market seem cheaper (or less expensive) than it actually is.