Nobel Laureate and Yale professor Robert Shiller recently wrote for the Project Syndicate about the comparative levels of market valuation across countries and how, “right now, the United States is leading the world.” He adds, “What everyone wants to know is why—and whether its stock market’s current level is justified.”

Shiller advocates using the cyclically adjusted price-earnings ratio (CAPE)– that he developed 30 years ago with Harvard professor John Campbell—and discusses the importance of evaluating projected earnings over long periods of time. “In pricing stock markets,” Shiller writes, “people don’t seem to be relying on any good forecast of the next ten years’ earnings. They just seem to look at the past ten years, which are already done and gone, but also known and tangible. But when Campbell and I studied earnings growth in the US with long historical data, we found that it has not been very amenable to extrapolation.”

As to what is driving up the U.S. stock market, Shiller writes, “It’s not the ‘Trump effect’ or the effect of the recent cut in the U.S. tax rate.” Instead, he argues, it may be due in part to the higher rate of share repurchases in the U.S. or a “stronger psychology of fear about the replacement of jobs by machines.”

Shiller concludes by stating: “The truth is that it is impossible to pin down the full cause of the high price of the U.S. stock market. The lack of any clear justification for its high CAPE ratio should remind all investors of the importance of diversification, and that the overall U.S. stock market should not be given too much weight in a portfolio.”