Why did robert shiller win the nobel prize
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Robert Shiller
There were times when Shiller wished he’d never written his 1981 paper, despite it being pivotal in his winning the Nobel Prize in 2013, together with Eugene Fama and Lars Peter Hansen. He continued arguing that the market is mostly driven by “non-economic things, people’s fears, prejudices, reactions to news-stories, elections and campaigns.” He went further saying, “To think markets are the best thing that could ever be for human welfare, that’s just wrong.”
Shiller fights against the belief that markets should be left alone and advocates for different types of regulation, in addition to the creation of new financial markets and institutions. He knows that after the financial crisis of 2008, people’s trust is still damaged and the risk of another crisis remains.
His wish is not to simply condemn the financial industry but to see it as a powerful tool for creating a better society. “What we need is a society that encourages financial innovation rather than being hostile to it,” he says. “But that is skeptical and involves government regulators who will police
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Robert Shiller
Robert J. Shiller is Sterling Professor Emeritus of Economics, Department of Economics and Cowles Foundation for Research in Economics, Yale University, and professor of finance 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, and statistical methods, and on public attitudes, opinions, and moral judgments regarding markets. He was awarded the Nobel Prize in Economic Sciences jointly with Eugene Fama and Lars Peter Hansen in 2013.
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; available via subscribing libraries on Oxford Online) proposes a variety of new risk-management
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Robert Shiller received the 2013 Nobel Prize in Economic Sciences, sharing it with Eugene Fama and Lars Peter Hansen. The three received the prize “for their empirical analysis of stock prices.”
Shiller argued that rational investors would price a stock at the present value of expected future dividends. However, he found (assuming that the real interest rate is constant) that stock prices fluctuate more than can be explained by fluctuations in dividends. Shiller attributed this larger-than-expected variance to psychological factors, arguing that investors must not be acting rationally (or, at least, not perfectly rationally). Because of this, he concluded, the stock market must be inefficient.
This finding challenged the widely-accepted theory of efficient markets and set off a revolution in finance. It is now recognized that high stock prices relative to earnings signal lower subsequent returns and vice-versa. This means, as George Mason University economist Tyler Cowen has noted, that, in contrast to the efficient markets hypothesis, in the long-term a patien
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