4 September 2011

Professors and Stock Markets don't mix

The (securely tenured) economist Robert Shiller seems to need some help in understanding stock market movements. In the New York Times he tries to explain the recent stock market volatility. But if he - or anyone else - thinks that this volatility was anything particularly exceptional he should just have a look back and he will find that the Cuban Missile Crisis of President Kennedy's stand-off with the Steel Industry in the early sixties also caused sharp sell-offs in the stock market. In the big picture a drop of 15 or even 20 per cent is nothing out of the ordinary. Any investor worth his salt knows that markets tend to decline more rapidly than they rise and if anything should be glad that he is offered the opportunity to acquire shares at much reduced prices.