Robert Shiller on housing crisis

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 the first annual Paul A. Samuelson Award of TIAA-CREF. 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).