Robert Shiller

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Robert Shiller

Born 1946
United States of America
Residence US
Nationality American
Fields Economist
Institutions Yale University
Alma mater MIT PhD 1972
University of Michigan BA 1967
Doctoral advisor Franco Modigliani
Doctoral students John Y. Campbell
Pierre Perron
Known for Financial economics
Behavioral Finance

Robert James "Bob" Shiller (born 1946) is an American economist, academic, and best-selling author. He has been a research associate of the National Bureau of Economic Research since 1980, was Vice President of the American Economic Association in 2005, and President of the Eastern Economic Association for 2006-2007. Shiller serves as the Stanley B. Resor Professor of Economics at Yale University and is a Fellow at the Yale International Center for Finance, Yale School of Management. His book Irrational Exuberance (2000) was a New York Times bestseller, and warned that the stock market of the late 1990s had become a bubble that could lead to a sharp decline.

Shiller received his B.A. from the University of Michigan in 1967 and his Ph.D. from MIT in 1972. He has taught at Yale since 1982 and previously held faculty positions at the Wharton School of the University of Pennsylvania and the University of Minnesota. He has written on economic topics that range from behavioral finance to real estate to risk management, and has been co-organizer of NBER workshops on behavioral finance with Richard Thaler since 1991. His book Macro Markets won TIAA-CREF's first annual Paul A. Samuelson Award. He currently publishes a syndicated column.

In 1981 Shiller published an article in the American Economic Review, titled "Do stock prices move too much to be justified by subsequent changes in dividends?" He challenged the efficient markets model, which at that time was the dominant view in the economics profession. Shiller argued that in a rational stock market, investors would base stock prices on the expected receipt of future dividends, discounted to a present value. He examined the performance of the U.S. stock market since the 1920s, and considered the kinds of expectations of future dividends and discount rates that could justify the wide range of variation experienced in the stock market. Shiller concluded that the volatility of the stock market was greater than could plausibly be explained by any rational view of the future.

The behavioral finance school gained new credibility following the October 1987 stock market crash. Shiller's work included survey research that asked investors and stock traders what motivated them to make trades; the results further bolstered his hypothesis that these decisions are often driven by emotion instead of rational calculation. Much of this survey data has been gathered continuously since 1989, and is available at Yale's Investor Behavior Project.

Shiller's most recent book is The New Financial Order: Risk in the 21st Century (2003).

Robert Shiller's plot of the S&P Composite Real Price Index, Earnings, Dividends, and Interest Rates, from Irrational Exuberance, 2d ed. In the preface to this edition, Shiller warns that "[t]he stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the historical average. … People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes."
Robert Shiller's plot of the S&P Composite Real Price Index, Earnings, Dividends, and Interest Rates, from Irrational Exuberance, 2d ed.[1] In the preface to this edition, Shiller warns that "[t]he stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the historical average. … People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes."
Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert Shiller (Figure 10.1, source). The horizontal axis shows the real price-earnings ratio of the S&P Composite Stock Price Index as computed in Irrational Exuberance (inflation adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). The vertical axis shows the geometric average real annual return on investing in the S&P Composite Stock Price Index, reinvesting dividends, and selling twenty years later. Data from different twenty year periods is color-coded as shown in the key. See also ten-year returns. Shiller states that this plot "confirms that long-term investors—investors who commit their money to an investment for ten full years—did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised, individually, to lower their exposure to the stock market when it is high, as it has been recently, and get into the market when it is low."
Price-Earnings ratios as a predictor of twenty-year returns based upon the plot by Robert Shiller (Figure 10.1[1], source). The horizontal axis shows the real price-earnings ratio of the S&P Composite Stock Price Index as computed in Irrational Exuberance (inflation adjusted price divided by the prior ten-year mean of inflation-adjusted earnings). The vertical axis shows the geometric average real annual return on investing in the S&P Composite Stock Price Index, reinvesting dividends, and selling twenty years later. Data from different twenty year periods is color-coded as shown in the key. See also ten-year returns. Shiller states that this plot "confirms that long-term investors—investors who commit their money to an investment for ten full years—did do well when prices were low relative to earnings at the beginning of the ten years. Long-term investors would be well advised, individually, to lower their exposure to the stock market when it is high, as it has been recently, and get into the market when it is low."[1]

Contents

[edit] Books

  • The New Financial Order: Risk in the 21st Century, by Robert J. Shiller, Princeton University Press (2003), ISBN 0691091722.
  • Irrational Exuberance, by Robert J Shiller, Princeton University Press (2000), ISBN 0691050627.
  • Macro Markets: Creating Institutions for Managing Society's largest Economic Risks by Robert J. Shiller, Clarendon Press, New York: Oxford University Press (1993), ISBN 0198287828.
  • Market Volatility, by Robert J. Shiller, MIT Press (1990), ISBN 026219290X.

[edit] See also

[edit] References

  1. ^ a b c Shiller, Robert (2005). Irrational Exuberance (2d ed.). Princeton University Press. ISBN 0-691-12335-7. 

[edit] External links