Robert J. Shiller is the Stanley B. Resor Professor of Economics, Department of Economics and Cowles Foundation for Research in Economics, Yale University, and fellow at the International Center for Finance, Yale School of Management. He received his B. A. from the University of Michigan in 1967 and his Ph.D. in economics from the Massachusetts Institute of Technology in 1972. He has written on financial markets, financial innovation, behavioral economics, macroeconomics, real estate, statistical methods, and on public attitudes, opinions, and moral judgments regarding markets.
His 1989 book Market Volatility (MIT Press) is a mathematical and behavioral analysis of price fluctuations in speculative markets. His 1993 book Macro Markets: Creating Institutions for Managing Society’s Largest Economic Risks (Oxford University Press) proposes a variety of new risk-management contracts, such as futures contracts in national incomes or in real estate that would permit the management of risks to standards of living. His book Irrational Exuberance (Princeton 2000, Broadway Books 2001, 2nd edition Princeton 2005, and in 15 foreign language editions) is an analysis and explication of speculative bubbles, with special reference to the stock market and real estate. His book The New Financial Order: Risk in the 21st Century (Princeton University Press, 2003, 2004, and in 8 foreign language editions) is an analysis of an expanding role of finance, insurance, and public finance in our future.
He has been research associate, National Bureau of Economic Research since 1980, and has been co-organizer of NBER workshops: on behavioral finance with Richard Thaler since 1991, and on macroeconomics and individual decision making with George Akerlof since 1994. He serves as Vice President of the American Economic Association, 2005 and President of the Eastern Economic Association, 2005. He writes a column “Finance in the 21st Century” for Project Syndicate, which publishes around the world.
Robert Shiller is a well-known economist and Stanley B. Resor Professor of Economics at Yale University and holds a joint appointment with the Yale School of Management. He is best known for his book Irrational Exuberance, a New York Times best-seller, which predicted the burst of the stock market bubble in the late 1990s, and warns about the emergence of a housing bubble after the dot-com bubble burst in 2000. A pioneer in the study of behavioral finance, he has organized a series of seminars in this field along with Richard Thaler, a professor at the University of Chicago. He is also the author of Macro Markets, which won the first annual Paul A. Samuelson Award of TIAA-CREF.
Born in 1946, Shiller obtained 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.
Long before he became famous for his book Irrational Exuberance, Shiller developed his thinking on this subject in a series of studies published in academic journals, most notably with an article entitled Do stock prices move too much to be justified by subsequent changes in dividends?, published in the American Economic Review in 1981. At the time, the dominant view in the economics profession was that financial market values were based on the rational expectations of investors. It was argued that, if prices are volatile, it is because of random new pieces of information which market participants have received.
In his 1981 study, Shiller started with the proposition that a rational stock market should base stock prices on the expected receipt of future dividends, discounted to a present value. Looking at the performance of the US stock market since the 1920s, he considered the kinds of expectations of future dividends and discount rates that could justify the wide range of variation experienced in the stock market. He concluded that the volatility of the stock market was greater than could plausibly be explained by any rational view of the future.
Shiller gained increased credence for his views following the 1987 stock market crash. He also conducted survey research, asking investors and stock traders what motivated them to make trades, which further bolstered his hypothesis that these decisions are often driven by emotion rather than rational calculation. This is a finding which is, perhaps, not particularly surprising to the layperson, but which nevertheless had to contend against the strong commitment to “rational man” among economics and finance academics. Shiller’s admirers, among others, consider the increasing respect that he has gained to be an impressive victory for common sense against the forces of entrenched theoretical dogma.
