Robert J. Shiller Quotes

A major boom in real stock prices in the U.S. after 'Black Tuesday' brought them halfway back to 1929 levels by 1930. This was followed by a second crash, another boom from 1932 to 1937, and a third crash. Speculative bubbles do not end like a short story, novel, or play. There is no final denouement that brings all the strands of a narrative into an impressive final conclusion. In the real world, we never know when the story is over.

As I write in 2012 we certainly do not believe that it is over yet, and the worst may be yet to come. Efforts by governments to solve the underlying problems responsible for the crisis have still not gotten very far, and the 'stress tests' that governments have used to encourage optimism about our financial institutions were of questionable thoroughness.

It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble.

My very first publication was an estimator - this was a statistical procedure - a kind of invention. My father got a patent and started a business; it wasn't successful, but maybe I have some of him in me.

Certainly some researchers are thinking more realistically about the market's prospects and reaching better-informed positions on its future, but these are not the names that grab the headlines and thus influence public attitudes.

Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity - or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories.

Stock prices are likely to be among the prices that are relatively vulnerable to purely social movements because there is no accepted theory by which to understand the worth of stocks ... investors have no model or at best a very incomplete model of behavior of prices, dividend, or earnings, of speculative assets.

How errors of human judgment can infect even the smartest people, thanks to overconfidence, lack of attention to details, and excessive trust in the judgments of others, stemming from a failure to understand that others are not making independent judgments but are themselves following still others - the blind leading the blind.

In the future, we will surely have even bigger such bubbles, each built up around its new and different new era story, and we will have to invent new names for them.

Just what is a speculative bubble? The Oxford English Dictionary defines a bubble as "anything fragile, unsubstantial, empty, or worthless; a deceptive show. From 17th c. onwards often applied to delusive commercial or financial schemes." The problem is that words like show and scheme suggest a deliberate creation, rather than a widespread social phenomenon that is not directed by any central impresario.

Economics is (now) about emotion and psychology.

If we exaggerate the present and future value of the stock market, then as a society we may invest too much in business start-ups and expansions, and too little in infrastructure, education, and other forms of human capital.

Some of the best theorizing comes after collecting data because then you become aware of another reality.

Somehow, talking to young students brings you back to reality - it should, anyway.

The word bubble creates a mental picture of an expanding soap bubble, which is destined to pop suddenly and irrevocably. But speculative bubbles are not so easily ended; indeed, they may deflate somewhat, as the story changes, and then reflate.

I also hope to challenge financial thinkers to improve their theories by testing them against the impressive evidence that suggests that the price level is more than merely the sum of the available economic information, as is now generally thought to be the case.