Robin Hanson <rhanson@gmu.edu> Wrote:
>Shiller then *tests* this expectation
Yes, Shiller looked at data, he looked at a mountain of it until he found two variables that produced a straight line for a while. He doesn't say why they give a better picture of reality than thousands of other variables, he doesn't explain why a deviation from that straight line should be a cause for worry. That's why I call it "technical analysis".
I have another even more fundamental objection, it hasn't worked. It has been nearly 4 years since the prediction, not a trivial fraction of a human lifetime, and in that time the market has exploded upward. Someday we'll enter a down market but even if it crashed tomorrow I wouldn't be impressed with Shiller's predictive ability. Even a stopped clock is right twice a day.
John K Clark jonkc@att.net