Robert Shiller

 

Planet Money

What's A Bubble? (Classic)

    Planet Money

June 30, 2021

8:42 PM ET

This episode originally ran in 2013.

In 2013, Yale economist Robert Shiller was asked if he would accept the Nobel Memorial Prize for Economics for his research on the stock market. He said yes. Then he learned he would be sharing the prize with someone else who studied the stock market, Eugene Fama at the University of Chicago. They were two of the three people who won the prize that year.

https://www.npr.org/2021/06/30/1011906325/whats-a-bubble-classic

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p.241

Nobel Memorial Prize in Economics (which in fact is not even a Nobel Prize, as it is granted by the Swedish Central Bank in honor of Alfred Nobel──it was never in the will of the famous man).

     (Taleb, Nassim (2004)., Fooled by Randomness, 2nd edition, paperback)

(Fooled by Randomness: the hidden role of chance in life and in the markets / Nassim Nicholas Taleb, 1. investments, 2. chance, 3. random variables, 123.3 Taleb, p.241)

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Nassim Nicholas Taleb, Fooled by Randomness, 2nd edition, hardcover, 2004   

p.61

Robert Shiller

his 1981 paper may be the first mathematically formulated introspection on the manner in which society in general handles information. 

volatility of markets, 

he determined that if a stock price is the estimated value of “something” (say the discounted cash flows from a corporation), then 

market prices are way too volatile in relation to tangible manifestations of that “something” (he used dividends as proxy). 

Prices swing more than the fundamentals they are supposed to reflect, they visibly overreact by being too high at times (when their price overshoots the good news or when they go up without any marked reason) or too low at others. 

p.61

The volatility differential between prices and information meant that something about “rational expectation” did not work. (Prices did not rationally reflect the long-term value of securities and were overshooting in either direction.)  Markets had to be wrong.

p.61

Shiller then pronounced markets to be not as efficient as established by financial theory (efficient markets meant, in a nutshell, that prices should adapt to all available information in such a way as to be totally unpredictable to us humans and prevent people from deriving profits). 

([ the so-called market is a sophisticated form of book making operation ])

p.275

Literature on bubbles:

 Kindleberger (2001), 

 MacKay (2002), 

 Galbraith (1991), 

 Chancellor (1999), 

 Shiller (2000)

     (Taleb, Nassim (2004)., Fooled by Randomness, 2nd edition, hardcover)

(Fooled by Randomness: the hidden role of chance in life and in the markets / Nassim Nicholas Taleb, 1. investments, 2. chance, 3. random variables, 123.3 Taleb, )

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