It's been hard to make sense of this market.

On one hand, Wharton Professor Jeremy Siegel went on CNBC last week and proclaimed that the Dow Jones Industrial Average (INDEX: ^DJI) will hit 17,000 in 2013. (It stands a little over 13,000 as of Thursday's market close.) Siegel told CNBC that this is "one of the cheapest stock markets I've seen." And the price data backs it up: The two leading stock market indices for U.S. stocks are trading at their lowest levels in at least four years.

Index

P/E Ratio

P/B Ratio

Dow Jones Industrial Average14.52.3
S&P 500 (INDEX: ^GSPC)15.82.3

Source: S&P Capital IQ.

On the other hand, there are pundits like Andrew Smithers, who recently declared that U.S. stocks are as much as 71% overpriced.

Smithers believes the market to be overvalued based in part on a metric created by Yale Professor Robert Shiller called the cyclically adjusted price-to-earnings ratio, or CAPE. The CAPE divides the market's price by the average of a full 10 years of earnings -- thus correcting for the cyclicality of corporate earnings.

Last week, Professor Shiller stopped by Motley Fool Headquarters in Alexandria, Va., and sat down for an interview in our offices. I asked him whether the CAPE shows an over- or undervalued market -- watch the following video for his insights. (Scroll down beneath the video to see a transcript.)