Shiller: Another Bear Market Could Happen

The kind of panic that ensure thirty years ago, on October 19th, 1987, could happen again. This according to Yale professor Robert Shiller in his recent New York Times article. While Shiller points out that regulatory and technological progress has ruled out an exact repeat of that day, the results of a survey he conducted within four days of the event revealed that “fundamentally, that market crash was a mass stampede set off through viral contagion.” … Read More

Shiller Tracks Past Bear Markets

In a recent article for MarketWatch, Yale professor and Nobel Laureate Robert Shiller shares insights on past bear markets in the U.S. and how the current market environment resembles the periods preceding them. Citing the “conflicting messages” of “high valuations following a period of strong earnings growth and very low volatility,” Shiller shares data he collected by reviewing 13 U.S. bear markets since 1871 (a drop in the market by at least 20%) regarding each… Read More

Shiller Says There Are No Genius Investors in the Long Run

While some investing approaches can work for long periods of time, over the long run, “without deep expertise, it makes little sense to veer much from a simple market portfolio—one that seeks to match the overall performance of the market, and not beat it.” This according to Yale professor Robert Shiller in a recent New York Times article. Using the example of Warren Buffett’s investing prowess, Shiller underscores that investors who have attempted to mirror… Read More

Shiller Says Bull Could Run for a While

When asked for his outlook on the market in a recent CNBC interview, Nobel Laureate Robert Shiller says investors should keep some stocks in their portfolio because the market “could go up 50 percent from here.” The economist, who helped develop the cyclically-adjusted price-to-earnings ratio (CAPE) market valuation measure, says that although the current CAPE (29) is above the 17-year historical average, he isn’t calling for a market decline. That said, he notes that diversification… Read More

Shiller Says Market Valuations Warrant Caution

Nobel Laureate Robert Shiller writes in a recent New York Times article that “today’s CAPE is sending a troubling message,” noting that the market valuation ratio he developed (which now stands at nearly 30) was higher only in 1929 and around 2000 (when it hit 33 and 44, respectively). In both instances, Shiller writes, “market declines followed those very high readings.” He qualifies his comments, however, by clarifying that the CAPE “suggests a dim outlook… Read More

Robert Shiller Shares Insights on the Trump-Bump

In a February interview with Bloomberg, Yale University professor Robert Shiller says, “I think the Trump effect is really important.” While Shiller, winner of the Nobel Prize in Economics, says he can’t speak authoritatively on what’s ahead because that would be “guessing human psychology,” he says that the current Shiller P/E ratio (also referred to as the CAPE) of 29 is “very high” and could spell trouble. It’s not at the level it was in… Read More

Shiller on Behavioral Economics

An interview with Robert J. Shiller, the recipient of the 2013 Nobel Prize in economics, was recently published in Pacific Standard magazine. The discussion centered on the advent of behavioral economics—the introduction of other social sciences into the field of economics. “It’s a revolution in economics that has taken place over the past 20 years or so. It’s bringing economics into a broader appreciation of reality,” says Shiller. While traditional economics has focused on the… Read More

Is Shiller’s CAPE as Scary as it Seems?

In the 1990’s, economists Robert Shiller and John Campbell created a valuation metric called the “cyclically adjusted price-earnings” ratio, or CAPE. A Wall Street Journal article from earlier this month examines whether this metric might be sending a false signal that the market is overheated. The CAPE ratio values shares based on 10 years rather than one year of earnings which, the article explains, “smooths out periods like just prior to the housing bust, when… Read More

Are Stocks Cheap or Expensive?

Yale’s Robert Shiller and Penn finance professor Jeremy Siegel have long dueled over whether stocks are cheap or expensive, and Daniel Fisher, of Forbes, reviews the arguments in his recent post. Shiller devised CAPE by measuring the inflation-adjusted earnings per share for the S&P over the trailing 10 years, instead of just the most recent quarter or year, and compared that number to long-run averages since 1871. The results showed a strong tendency for CAPE… Read More

Jeremy Siegel’s Critique of the Shiller P/E Ratio and His Market Outlook

Financial Advisor reports on Wharton School of Finance Professor Jeremey Siegel’s comments at the annual Inside ETFs conference, where he critiqued the widely used Shiller P/E Ratio. Siegel did not necessarily attack the original logic of the Shiller P/E (which won its creator, Robert Shiller, a Nobel Prize). Instead, he noted that changes to the definition of generally accepted accounting principles (GAAP) earnings by Standard & Poor’s in 1990 have had an effect. Following the Financial… Read More