Nobel Prize Prof. Robert J. Shiller on Market Efficiency and the Role of Finance in Society

well thank you I wanted to talk today about market efficiency and about the role of Finance in society it's often seemed that the efficient market hypothesis which says that financial markets work perfectly is essential to the whole idea that our financial markets are contributors to society the view I want to express here is that they don't work perfectly but that nonetheless financial markets are really central to our civilization our quality of life and that the imperfections in financial markets should be taken as a challenge for people working in finance a challenge to improve on the markets and I have a sense that we have a long way to go they are a pillar of our civilization but they are not fully there yet as you just heard in the introduction I had the honor of winning the Nobel Prize jointly with Lars Peter Hansen and Eugene fama at the University of Chicago I thought I would start by presenting a little bit of Eugene fama Nobel lecture as a way of putting things into perspective it was an interesting experience at the in Stockholm we had a Nobel Week I got to know Eugene fama and Lars Hanson very well because we were in events like this all week long the real controversy seemed to develop between me and Pharma Lars Peter Hansen the misfortune to be kind of halfway between us and so tended to get ignored at least by the news media I didn't want to be unkind to Eugene fama here he is winning the Nobel Prize for his contribution of the efficient markets hypothesis I certainly wouldn't want to criticize it at that moment in his life but it turns out that at some level I found myself doing that and it got a little bit contentious at times so I thought I would start in deference to I should add I am a big admirer of Eugene fama well of both of my co laureates but despite the fact that gene fama and I seem to disagree totally I've always found his papers stimulating and I've learned from them and actually after spending a week at the Nobel Week I think that we agree much more than you'd think there's a different rhetoric that we have I tend to mention psychologists and sociologists often Eugene fama never once quoted a psychologist or a sociologist it there's a different worldview but I think we largely agree on the facts or at least a good part of the fact so both of our Nobel both Dean Thomas and my Nobel lectures are published in the June issue of the American Economic Review so I thought why don't I start with Eugene fama so the title of his lecture was two pillars of asset mark pricing pillar one was work on efficient markets testing whether prices reflect all available information that was the original concept of Marcus what does it mean to say markets are efficient it means they've got it all that prices reflect all public information and that if prices move it must be because new information has come and not for any other reason but we also he said need another pillar you can't support an archway with one pillar you need another and that other pillar he said is developing and testing asset prices models pricing models the problem with efficient markets theory is it hasn't been originally clear on just what the hypothesis is we're testing it was originally just testing whether prices are predictable but then people pointed out that well shouldn't they be predictable because for example the central bank is changing interest rates and they could announce their plans so that should communicate too predictable variations in markets so he went on to say that there was a joint hypothesis problem I don't disagree with this at all let me go on to his first slide in his talk and I took this from the American Economic Review this slide from his talk was taken from a paper that he wrote in 1969 with Lawrence Fisher Michael Jensen and Richard roll and what this was was the paper that started the whole event study literature I shouldn't say absolutely started it because there were event studies done as far back as the 1930s but they had never been presented as central to financial theory before never a plot like the one you see here had not yet been shown so what is this plot what the these authors did is they looked at firms announcing splits and they defined event time zero is the moment when they announce that their stock will be split and you can see event time along the horizontal axis the blue dots represent cumulative abnormal returns not explained by the market as of those many months before the event month and the look of the picture is quite striking isn't it the the dots move up quite exponentially until suddenly at the event month and after that nothing absolutely flat they also pointed out that dividends you can look at dividends paid before and after the event dividends don't have such a nice shape to them they keep going up after the event so what's happening here well it's very simple I think the firm is splitting in response to price increases the company has been doing very well and so they split so but once the once that once they've done that there's no reason to expect the stock prices to go up any more this picture was so striking that it gave people a sense of perfection in markets that is a perfect picture isn't it exponential and then horizontal straight line not many people really understood that you would expect that so this is the first pillar alone the so my conclusion from this is wonderful wonderful paper we've established a half-truth have efficient markets models have some very clear predictive power that event studies repeatedly show patterns like this but I don't think that it's the I where I think we differ is in extrapolating from that what he's observed here isn't the whole picture about financial markets what events studies reveal is not the whole picture now I discovered over the week that he and I have a different definition of bubble and that that accounts for a lot of the apparent disagreement what fama thinks a bubble is is what it is a is a situation in a speculative market in which prices grow steadily and exponentially until they get just too high and then they crash suddenly and irrevocably maybe he's generalizing from the metaphor of a bubble I don't know why they named it bubble but they they chose the metaphor of a bubble bursting to describe your rational behavior of the market the problem with that metaphor is that the ascent of speculative prices is never a uniform it doesn't grow steadily and then when it bursts it doesn't burst irrevocably it comes back up again or it's not so his definition differs from mine I think of a bubble I might not have used the word bubble I in in my book irrational exuberance I defined it more as a social epidemic mediated by price increases so my definition of a bubble is a period of more or less in increases in speculative prices but not every day and subject to many interruptions and the reason they're increasing is partly feedback price increases even if they're irregular lead to more price increases and how do they do that they do that through sociological channels they there's a conventional wisdom head of any point of time that starts to get repeated there's talk in my story the news media are central to a speculative bubble bubbles thrive on stories stories are proliferated that during a bubble so for example I demonstrated in my questionnaire surveys or little little sayings proliferate that are encouraged by a bubble during the stock market boom of the 1990s the phrase which you've heard many times in I'm sure the stock market is the best investment for long term holders who can buy and hold through the ups and downs of the market that phrase grew in public acceptance until the peak of the market and then it fell as the market fell and as the market went up again into 2007 belief in that phrase went up again and then it fell after that so it's it's not like people are objective observers of the fact as efficient markets would say they respond to talk and the news media encourage certain kinds of talk that when the market is going through different phases our families issed criticizing me and so I haven't had much of a chance to rebut what he put in the American Economic Review but I thought maybe I can use this occasion so I'm quoting the AER version of his nobel lecture he said he looked at me and said I see two forecasts one was for the stock market and one was for the housing market and they were both wrong and my thought was what to forecasts have I made well he picked dates which were he he thought he takes the earliest date that I made any suggestion that the market might be overpriced I don't know why he did that isn't that kind of and then he points out that the market didn't go down a lot after that but it was the earliest time that I said one of them was in December of 1996 when I was asked to testify about the strength of the market before the Federal Reserve Board so dutifully as a good citizen I went in and I said I think the market is looking overpriced and then he points out that the market actually went up between then and the bottom of 2003 but it didn't go up much and if you convene it to real terms even from that date the market lost six-six tenth of a percent per annum for the next 13 years it would be much worse if we look at the top of the market in 2000 when my book came out and he did the same thing regarding my S&P case-shiller home price index so he said that I forecast a decline in the market in July 2003 and the actual decline was only 6.7% well first of all the title of my 2003 paper was a question with case is there a bubble in the housing market and we did not make a forecast even so if you go in real terms from 2003 to 2012 it declined 27 percent and 14 percent to today's date but I don't think that I don't think I want to make my case on on these timings things that he picked out he's a good debater he knows how to pick things out make them instead what John Campbell and I showed in our 1996 talk was that there has been a negative relation between long term returns subsequent to high price earnings ratio and what what John Campbell and I did is we computed a price earnings ratio that we call cape or cyclically adjusted price earnings ratio which is real price divided by a ten-year average of real earnings that's stabilized is the new the denominator so that it's not quite so wild and we found you can see there's a substantial fit well this is the same diagram that we presented before the Federal Reserve Board in 1996 updated the the red dots are largely updates and you can see that there's a negative relation with a substantial r-squared you know something about the about a quarter it's not miraculous but it does show forecasting ability of the price earnings ratio so and as for the housing market I wrote a paper with chip case in 1989 called the efficiency of the market for single-family homes in which we carefully did forecasting regressions based on our new case-shiller home price indices for four cities and we we found that there was a lot of momentum in the housing market amazing amount of momentum much more than you'd think from the comparison with the stock market and the R squared in our regressions for one year home price changes was between point one and point five so there's a lot of momentum in the housing market so I think we can forecast it I you know the thing that bothers me about families si is he seems to be extrapolating from the stock market to the housing market the housing the stock market has much lower amount of momentum so he thinks he just seemed to assume that the housing market is like the stock market but the housing market has much higher transactions costs and it's much more populated by mom and dad or your kids or people who just don't know much about the markets and finance so why would you think that I was wrong to think it was for castable at least somewhat forecast of all the problem with inefficiency in housing is that we'd had as of when we wrote very little research on it case and I did a survey of the literature on the forecast ability of home prices and we found that there was almost nothing written as of 1989 why is there so much attention on the stock market and so little on the housing market I think this is revealing again of some sociological principles we are heard like in our research topics and it wasn't that there was some barriers some obstacles to doing research on home prices first of all the data was hard to collect you have to go to deeds office and collect buy handle it was starting to become available electronically the other thing is that there were no good home price indices nothing analogous to a stock price index we had back then the in the United States we had the NA our median price level at home but that's not anything like a stock price index because it's different homes in different months in some months they sell big houses in some months they sell little houses it would be like constructing a stock price index as the median price of a share sold without regard for what company it was so that wouldn't make a lot of sense the other price index that had been around when we published was the census price of a new of new single-family how was it sold it was a hedonic regression that took account of a few characteristics like square feet of four floor space and they standardized that well what I have shown in this diagram is this was in my Nobel lecture I'm showing the census index of new family single-family houses sold and our index over the same time period you can see that our index goes up much more so which one is right ours is a repeat sales in there that's what case and I introduced there was no published repeat sales index for home prices what is a repeat sales index it's an index that looks at the same houses through time just as a stock price index does we found much bigger increase ours were existing homes being resold whereas the census was new homes I think the explanation for the big difference between them is very simple the homes that were appreciating a lot tended to be in congested areas where there was no land available to build so they didn't build there and they built relatively cheap homes in far out places so the real index is ours and it was not available anywhere nobody knew what home prices were doing since then we've seen a huge proliferation of home price indices in many cases repeat sales home price indices and they've revealed the kind of enormous swings in home price markets there is really no reason to doubt that this movement is irrational the principal one of the principal arguments used in efficient markets theory has been that well if if smart money could see this happening they would bet against it they short the market well how do you short the single-family home market you can't so the smart money are just not there they don't have the opportunity this led us to think that that we should create a futures market or I'll come back to that the diagram here also shown in my Nobel lecture is a home price index based primarily on repeat sales the blue line for the United States from 1890 to the present and the other things shown our building costs that's an index of labor concrete steel and lumber and population and interest rates the really remarkable thing is that we have huge right this I have to stand here I guess we have a huge run-up of home prices unprecedented in history and the thing that amazes a lot of people no increase from 1890 to 1990 this is in real terms again we've standardized the how quality of houses got better and they got bigger but we've this is an investment index so it shows that there was no capital gain in real terms on houses in a hundred years when you just look at this picture I think that the academic profession doesn't reward collecting data as much as it should we just look at this picture and it suggests something to me other than efficient markets so what is going on here well you what one thing I did is just go back and read old newspapers what were they saying before you can search now on historical newspapers so I searched housing bubble knit nobody ever said that it wasn't in their vocabulary I look for home prices what are they writing about home prices usually not much they would be saying you know the articles written for builders in the very deep in the business section not I think most people back then we're not really worried about home prices is there was a cultural change it's like car prices you don't worry you're thinking well maybe in a couple year I'll buy a car you don't think I better buy it now because it'll get too expensive wouldn't cross your mind normally the same thing for housing there are some interesting movements in home prices notably this one here s at the end starts in 43 it's the end of World War two so I went back and read newspapers from that time and you've probably forgotten about this this boom if you ever knew that it existed it was the so called baby boom and the newspapers were writing about it they said the war is basically over we won the war soldiers are coming back they're going to want housing and they're going to want a two-bedroom house not just a one-bedroom house because they're going to have kids maybe three bedroom and so people started specula there was a speculative they weren't people weren't immune from speculation but it was different because we had just sent was it 12 million men - to the war and we'd shut down the housing industry for several years this was a reaction to real events but what about this one here this amazing run-up I think this is sociological it's something about certain theories being developed that so this is our futures market caryl case and I approached the Chicago Mercantile Exchange and said wouldn't it be nice if we had a futures market in single-family homes and in fact our indexes were designed for futures market we also approached Standard & Poor's and we told them that our indexes are as close as we can come in concept to the S&P 500 they're designed for trading we thought that price index Theory should really be trading oriented and that's what we did right from the beginning the CM e launched their contract in 2006 and it's going still today but disappointing the volume of trade is low and it's something my best explanation for that is you don't have liquidity unless you have liquidity people would trade much more in this market if it were more liquid but how do we get there it's called a chicken-and-egg problem but the market has been outstanding for a number of years and there was an article in the Journal of real estate literature that looked at its forecasting ability and that's a scatter of diagrams showing predicted and actual changes in a regression line there is a positive relation and I don't know if that r-squared appeals to you but it is substantial so we do have a market that does I think show some price discovery for future home price changes there been other developments of derivatives markets for home prices the invest the International Property database is a UK monthly index they have developed the derivatives market that rose to about eight billion dollars by 2008 I tried to update these numbers and it was unsuccessful I have a theory about these I'm going to show you some other examples many people try to start new markets and if you just browse the web to find out about them you'll find lavish statements at the beginning and then they just fade away I don't I think I PD is still going strong but maybe they're not growing as well I'll have to find out Halifax in the UK has been the basis the Halifax home price indices has been the basis of a number of attempts at futures market the London box in 1991 which failed City index spread betting 2001 discontinued IG index spread betting 2002 discontinued spread for cantor index as far as I know continues but I couldn't find it this morning looking on on the web goldman sachs had covered warrants on the Halifax index and there are other examples they just don't seem to get a lot of traction and I wonder why it is because the housing market is in terms of a total value something like the stock market then in addition to our S&P case-shiller Chicago Mercantile Exchange index hedge Street com was a firm that the tempted home price edging with their hedge --let's concept it failed Rex and company did some real estate risk management products but I think they've kind of reoriented their business radar logic launched forward contracts in 2007 and then the Chicago Board Options Exchange created radar logic home priced futures in 2012 shut down in 2013 I also set up a company with my colleagues called the macro markets and we created home price long short securities up major market and down major market which traded only for a little while so we haven't been able to get a real grip on this these markets should be important that the whole financial crisis that we are were recently in was caused by fluctuations in in housing market so that was a key the stimulus for this and yet we haven't been able to get it going now we thought that there should be other products not just a futures market or a forward market there should be retail prod retail products that would enable people to manage the risk of their home so what happened in this financial crisis in the United States at the bottom of the crisis we had over 15 million US households that were underwater with their mortgages that means their house was worth less than their mortgage for most of these people the house was practically their life savings so you had 15 million households that were virtually wiped out they were in debt no wonder that they stopped spending and why we had such a crisis we had proposals as early as 1994 wrote a paper with alan weiss that proposed home equity insurance why don't insurers of homes who offer fire insurance or homeowners insurance also ensure the value of your house there doesn't have to be a moral hazard problem if they don't insure your own house value because the big movements and home prices are citywide or at least neighborhood wide and so we could base it on an index of home prices in your neighborhood there have been attempts to do this notably in in Ohio the home value insurance company created a home value of protection insurance policy in 2011 and it seems to have faded away I couldn't find it mentioned on the web anymore I think it they couldn't sell them when we approached insurance companies asking them to consider creating home equity insurance they tended to say that there wasn't a demand for it people are not they're not worried about home prices now I wonder why aren't they worried because the the risk of a loss of the market value of your home it must be greater than the risk of loss of fire which people routinely insure so I think it's somehow not a salient and event it is indeed puzzling because during the housing bubble that we saw there was so much excitement about real estate but the excitement seemed to take certain forms I'm going to buy a house I'm going to lend to my children so they can buy a house quickly before they're priced out of the market and it just was unfamiliar to people's thinking instead of doing that I can take a hedging position against home price increases the other thing is alternative mortgages which I've been arguing about for some years now and I have a well I wrote a proposal for I called continuous work out mortgage and we have a this is a mortgage with a pre-planned workout which would be offered by a private insurance company they would say that if you take out a mortgage in your house and if home prices in your neighborhood falls so far as to put you let's say underwater we will forgive the that fraction of the mortgage that keeps you from falling out of into a negative net worth why can't they offer that well we have a session with Rafa Joukowsky Shaheed him ever ahem and Mark shackleton tomorrow we'll discuss that but I think the problem we've been trying to sell insurance companies or mortgage companies on the idea and it seems to be partly a problem that there is no hedging market for home prices if they could hedge the risk they could offer this risk management well but we created a futures market but they're still not happy because there's not much trade in our futures market well if they would start a product like this then maybe there would be trade maybe we're getting more optimistic now we're seeing more institutional investors trading in single-family homes so maybe this thing will take off but we're waiting to see now this is second pillar Eugene fama talked about we have to have a model what is it that we expect to see in efficient markets and how do we test this the simplest efficient markets model is that price is the expectation with information at time T and that's the soups of the present value of dividends or we'll call the present value of dividends P star so P is the expectation of P star which is this present value and let's start in the simplest case that R is constant now this is you might say an extreme efficient markets model but we've got to make some simplifying assumption this is our first step so we can actually plot the efficient the present value and that's what I did in a paper I wrote in 1981 well the data set that I had from in 1981 was the data set between these two vertical lines this and this and this is update of it the problem the two dashed lines are present values of subsequent dividends and the problem is we don't know about dividends after the year 2013 so I had to make some assumptions I made two different assumptions the assumptions mainly affect the end of the series because the discounting wipes it out for the earlier part of the series the point that I made in that paper is that stock prices are much more volatile than the present value of dividends and so what do you make of that I got a lot of controversy that this has been 30 years it's been a lot of controversy about what that might or might not mean but I think what it does show is that the stock market if there were perfect foresight it would be very stable if those fluctuations are due to some rationale the blue line fluctuations are due to some rational expectations it is about something that never happened in the last century which is a useful perspective so what's shown here is the real S&P dividends from 1871 to 2013 and there's a lot of short-run oscillations but they appear to be trend reverting but I'm better at giving other models than gene fama was he talked about the second pillar but never really I thought presented a equilibrium model so I have a couple other alternative models these growing a lot of what I'm talking about goes way back this is decades ago that we were discussing these but they're still relevant this is a model that says the price is the expected present value of dividends discounted by a time-varying one-year or short interest rate I did it with annual data and this is a risk premium which is constant through time you might object why do you make it constant through time well I don't know we have to make some assumption this is the problem with we have too many free variables than we can explain anything the other alternative theory is what I call the Robert Lucas asset prices in exchange economy theory which has price as the expected present value of P star C which is the present value of future dividends discounted by the marginal rate of substitution implied by a utility of consumption model with a coefficient of relative risk aversion a which I took to be three here it's just kind of a reasonable value and so I've got here three different present values the blue line once again is actual stock price and the red green lines are present values and if you put in these fluctuations in discount rates it shows a more volatile market but not one that tracks the existing market very well maybe a little bit well so I'm enticed to think that there's some element of truth in these theory but I don't think it's ever been brought out to the final conclusion well enough some things I think that the consumption discounted model seems to work somewhat well in that if you look at 1929 the stock market was very high relatively and so was the consumption discounted dividends but but the theory would say that that means people knew the Depression was coming the reason the stock market was high according to this theory in 1929 is that people saw the depression coming and we're so desperate to save money that they would willing to take it even though they knew the stock market would decline but I don't think it I think there might be some element of truth to this theory though it doesn't look very impressive in this diagram looks like there's excess volatility the movements in the stock market have nothing to do over most of the period with the present values but I think that there is maybe some truth that we see high valuations in the last 20 years and we the end of end point of these series are not that meaningful about because we I had to make an endpoint assumption but I think maybe we are in a period now of anxiety over the future and this is a theory that I'm toying with I wrote about it in my New York Times column a week ago I think that right now I'm just throwing this out is it not a very generally applicable theory but I had a theory which I called in my newspaper column the life preservers on the Titanic theory that right now people are worried about the future and they they want to save more the reason they're not saving more may be that investment opportunities for new savings and new investments is not good partly because their people are not spending enough and and so they end up bidding up existing asset prices so when the Titanic went down someone went around maybe offering for sale life preservers and people would pay a huge sum for them even though they knew it was going to go down so I think in some sense that's where we are now we have high stock prices and high bond prices maybe high real estate prices every not everything is high I'm oversimplifying grossly oversimplifying I'm just trying to find an element of truth and look this theory I'm sure that's not the whole picture i thoughts led to it a literature on variance bound tests that I did and Ken singleton Hanson and jaganathan and others did in the 1980s and there was a lot of discussion and criticism I have some of these other papers here but I think these tests these literature has led to a change in thinking it was particularly important was Campbell and Amer who in 1993 did a log-linear var decomposition of sources of volatility and for the u.s. aggregate stock market and I think with a pretty good theoretical framework showed that the standard deviation of the noise the excess returns innovation was two to three times that of the dividends innovation at least if you remember my plot of real dividends since 1871 they looked pretty for the dicta bowl that they seem to have been trend reverting see if you take that as given and there just shouldn't be much real fundamental fluctuation in the market it must be mostly noise the idea that markets might be beauty contests as Keynes wrote about in 1936 is is also I think enhanced and we we have kind of a new theoretical literature that takes beauty contest seriously so what I mean by a beauty contest is we're trying to find the prettiest stock namely the one that will be attractive to another buyer after us we're short term we're not focused on long term fundamental value because we're going to sell the thing so it's all focused on predicting the behavior of other people and I think that this beauty contest theory is now somewhat established as a respectable theory of financial markets and it's a theory that allows for excess volatility there's also a huge literature developing in behavioral economics like prospect theory and that people talk about ambiguity but not what about individual stock so it you know my general impression from the aggregate US stock market is that most of the fluctuations in the market this is what Campbell and Hammer said what most of it is just the speculative movements it's not anything fundamental and you know it could be turns out maybe some day we'll have some huge disaster who will change our conclusion but it hasn't happened in a century and a half so I'm inclined to listen to the sociologist and the social psychologist on the other hand if you go down to individual stocks it looks different because the fluctuation in dividends of individual stocks is not so trend like there's much more information about individual stocks so Tomoe vault inaho did a study based on campbell amaura type analysis and found that the expected the variance of expected return news is only about half of the news about future dividends for us individual stock so I think there is some merit to the to the simple efficient markets model this is a paper I did in with Jimin Jung in 2001 I wanted to this is not really a definitive test but it's just a visual impression that you get we looked at all stocks that we could find on the crisp tape that existed unchanged from 1926 to 2001 and unbeliev it or not there were only 49 companies but we took those 49 and for each year from 1926 to 76 we did up we did a scatter diagram each there's 2499 firm year observations and we have the horizontal axis the dividend price ratio and the vertical axis subsequent dividend growth the simple efficient markets model says that lodi pd / p stocks should have higher dividend growth and high dividend price ratio stocks should have low dividend growth and indeed we do see a negative relation but not exactly the -1 relationship that you'd expect and since this isn't surprising look I like to look at this this outlier here which has a lot of weight that is slumbers J and that point refers to the Great Depression so what was happening the dividend price yield but was 0.4 and what was happening well Schlumberger was recklessly paying out its last dividend and it wasn't it was an oil drilling company and in the Great Depression that was just not a good business not for a long time but they paid out a huge dividend and everybody knew it and and so it was priced at that amazing dividend price ratio and indeed people were right the firm did very badly starting from that day to 25 years in the future not so surprising but what I'm saying is that there's truth to the efficient markets MA that kind of truth so it's it's good that's why everything is a half truth that's the problem with with economics in general simple theories are usually wrong we have to get degrees of belief in these theories so what has happened since 1990 is that people are still a respectful of these mathematical models like the Lucas model but they think they have to be adapted and modified and so the behavioral finance revolution has strengthened over the years and I now think is a quite a respectable part of finance nonetheless even though prices are not entirely meaningful we do have uses for them so this this is the in-between position that I'd like to take that prices and financial markets are erratic and they're like human beings your your national leaders are erratic sometimes too but you still need the kind of leadership or discovery that these markets are these people allow so I wrote my book finance and the good society was written in 2012 and it was a book about financial markets in the real world that we live in real world with flawed people and some manipulation and problems that require regulation but I think that's the world we live in and I think that we have to we have to move forward from that so I wrote a book in 2003 called new financial order and another one in 2012 finance and the good Society and key elements of these books is first of all finance is an important leader in our society that is we need financial organization we cannot depend on churches or civic organizations or charity which will they have their role but they have their limits as well for example when people are hurt there's an earthquake or something there will be some charitable help kind-hearted people will give money but they won't do it enough we need insurance the democratization of Finance means the extension of financial risk management principles to a broader population and extension like this requires financial innovation we are also at a time in history where information technology is Explo coding and making great advances that I think well this should be an exciting time to be part of the finance profession to adapt the new information technology so that financial markets can work better than they worked in the past part also again for improving our financial society is creating alternative financial institutions that allow for better action on social and human values that take account of human psychology for example recent innovations include the benefit corporation which is a sort of halfway between for-profit and nonprofit or another example is crowdfunding which allows people through the internet to interact on really venture capital type proposals these are experiments they're to me interesting but I think there have to be many more experiments but any experimentation in financial innovation has to have a sense of reality about how markets function and it has to be what engineers called human factors engineering that is engineering devices that will work with real people and their real frailties thank you

Channel: USI Università della Svizzera italiana

Views: 27,723

Rating: 4.9475408 out of 5

Keywords: Robert J. Shiller (Academic), Nobel Prize (Award), Economics (Field Of Study), Finance (Industry), Financial Crisis (Literature Subject), Yale University (College/University), Università Della Svizzera Italiana (College/University), Keynote (Type Of Public Presentation), Efficient-market Hypothesis, Financial Services (Industry), European Finance Association, Market, Swiss Finance Institute, Asset Management

Id: z5hWd2Zoies

Length: 51min 19sec (3079 seconds)

Published: Mon Sep 01 2014