Robert Shiller: Stock Market Ebola

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Has a bear market begun? It’s a great question. The problem is that short-term market movements are extremely hard to forecast. But we live in the present and must try to understand what’s driving markets now, even if it’s much easier to predict their behavior over the long run.

Fundamentally, stock markets are driven by popular narratives, which don’t need basis in solid fact. True or not, such stories may be described as “thought viruses.” When they are pernicious, they are analogous to the Ebola virus: They spread by contagion.

When a Stock Market Theory Is Contagious

That killer quote from Professor Robert Shiller’s latest column at the New York Times. Shiller’s book, Irrational Exuberance, has been one of the most influential things I’ve ever read about how human psychology impacts markets and the economy. I prefer the second edition, as it covers the financial crisis and the aftermath of the dot com bust.

I think he gets to a really important point here. Click the link above to read the whole piece.

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