Here is an interview with this year’s Nobel Laureate Robert Shiller. He states that the whole idea that the stock market reflects fundamentals is wrong in that it really reflects psychology. Shiller also reflects on the US housing bubble.
Economics is not an exact science. I wanted to be a scientist when I was a child. And I’ve been lamenting ever since that I go into a field where I just can’t be exact, and I don’t think anybody can. What is the economy going to do next? We just went through the biggest housing bubble in U.S. history. It’s off the charts. And now it’s starting to go up again. What to make of that? I mean, are we going back into another bubble economy? I don’t know. I don’t see how anybody knows that.