How Long Is Wrong? Reflections on Six Years of Insights from Two of the World’s Foremost Financial Analysts

I first worked with Yale economist Robert Shiller in connection with a conference called the CFA Institute Risk Symposium, which was held in New York in February 2006. I had recruited Peter Bernstein to speak and to serve as an adviser on the program. “You’ve got to get Shiller,” Peter told me, and Bob was kind enough to accept our invitation to speak.

It was a wonderful conference in what seems now an almost innocent age in the investment world. Standard deviation was still a metric of considerable importance, and volatility seemed, well, more theoretical than it does now. Over the course of a day and a half we examined risk from numerous angles, and Bob Shiller ended the conference with a brief overview of the biggest financial bubbles over time, comparing them with statistics from the U.S. housing market.

“Does it look like a bubble?” Shiller asked the audience, showing a series of hockey stick graphs. The one plotting the relationship between housing prices and rents was particularly damning. Read more.