Robert Shiller

Robert J. Shiller
Born	Robert James Shiller 29 3, 1946
Birthplace	Detroit, Michigan, United States
Nationality	American
Occupation	Economist, academic, author
Title	Sterling Professor of Economics
Employer	Yale University
Known for	CAPE ratio (Shiller P/E Ratio), research on asset price volatility, behavioral economics, narrative economics
Awards	Nobel Memorial Prize in Economic Sciences (2013), Global Economy Prize (2018)

Robert James Shiller (born March 29, 1946) is an American economist, academic, and author who serves as Sterling Professor of Economics at Yale University. A foundational figure in the study of behavioral finance and asset pricing, Shiller is best known for his empirical research demonstrating that financial markets are far more volatile than traditional efficient-market theories would predict. His work on speculative bubbles, particularly in the stock and housing markets, brought him wide public attention in the early 2000s, and his development of the cyclically adjusted price-to-earnings ratio (CAPE ratio), also known as the Shiller P/E Ratio, has become one of the most closely watched valuation metrics in global finance. In 2013, Shiller was awarded the Nobel Memorial Prize in Economic Sciences, shared with Eugene Fama and Lars Peter Hansen, for his "empirical analysis of asset prices." Beyond his academic contributions, Shiller has been a prominent public intellectual, frequently offering commentary on market conditions, economic policy, and the role of human psychology in shaping economic outcomes. His books, including Irrational Exuberance and Narrative Economics, have reached audiences well beyond the economics profession and have influenced how policymakers, investors, and the general public understand financial crises and market dynamics.

Early Life

Robert James Shiller was born on March 29, 1946, in Detroit, Michigan. His father was an engineer and entrepreneur who owned a company that manufactured industrial products. Growing up in a household where engineering and business intersected, Shiller developed an early interest in understanding systems—both mechanical and economic. The industrial landscape of postwar Detroit, a city at the center of American manufacturing, provided a formative backdrop for Shiller's later inquiries into the forces that drive economic booms and busts.

Details of Shiller's childhood and adolescent years in Detroit remain limited in publicly available sources, but his trajectory from a Midwestern upbringing to the highest echelons of academic economics reflects a progression through the American educational system during a period of significant expansion in higher education and the social sciences. His father's entrepreneurial background likely exposed him early to the practical realities of business cycles, investment risk, and the unpredictability of markets—themes that would come to define his scholarly career.

Career

Academic Career at Yale University

Shiller joined the faculty of Yale University, where he has spent the bulk of his academic career. He holds the title of Sterling Professor of Economics, one of the most prestigious academic appointments at Yale. From this position, Shiller has produced a body of research that spans asset pricing, behavioral economics, financial innovation, and macroeconomics. His work at Yale has been characterized by a willingness to challenge prevailing orthodoxies in economics, particularly the efficient-market hypothesis, which holds that asset prices fully reflect all available information.

Shiller's early academic work focused on the volatility of stock prices. In a series of influential papers published in the early 1980s, he demonstrated that stock prices exhibited far greater fluctuations than could be explained by subsequent changes in dividends—a finding that posed a direct challenge to the efficient-market framework. This research helped lay the groundwork for the field of behavioral finance, which incorporates insights from psychology into economic and financial theory.

The CAPE Ratio (Shiller P/E Ratio)

One of Shiller's most enduring contributions to financial economics is the cyclically adjusted price-to-earnings ratio, commonly known as the CAPE ratio or the Shiller P/E Ratio. The metric is calculated by dividing the current price of a stock market index by the average of ten years of earnings, adjusted for inflation. By smoothing out short-term fluctuations in earnings caused by the business cycle, the CAPE ratio provides a longer-term perspective on market valuations.

The CAPE ratio has become one of the most widely referenced indicators in financial analysis. According to Investopedia, the metric "assesses the stock market's pricing by adjusting past earnings for inflation over a" ten-year period, providing investors with a tool for evaluating whether markets may be overvalued or undervalued relative to historical norms. The ratio gained particular prominence during periods of market exuberance. In November 2025, NPR reported that the Shiller PE Ratio was "almost as high as it was in November 1999, just before the dot-com bubble burst," raising questions about whether an artificial intelligence investment bubble might be forming in financial markets.

The metric has also been applied to comparative international analysis. In early 2026, The Motley Fool reported on Shiller's observations regarding the divergence in valuations between U.S. and international stock markets, noting that international stocks had outperformed U.S. stocks in 2025 and that "valuations are now miles apart between the U.S. and other markets." Shiller's use of the CAPE ratio to compare markets across countries has contributed to ongoing debates about portfolio diversification and the relative attractiveness of different global equity markets.

In November 2025, The Motley Fool reported on Shiller's long-term forecast for U.S. stocks, noting that his analysis "highlights the premise that investors should diversify their portfolios well beyond" domestic equities, given elevated U.S. valuations.

Irrational Exuberance and Market Bubbles

Shiller's 2000 book Irrational Exuberance—its title borrowed from a phrase used by Federal Reserve Chairman Alan Greenspan in a 1996 speech—argued that the U.S. stock market was experiencing a speculative bubble driven by psychological factors, media amplification, and herd behavior rather than rational assessment of underlying economic fundamentals. The book was published just as the dot-com bubble reached its peak, and the subsequent market crash lent considerable credibility to Shiller's analysis.

A second edition of Irrational Exuberance, published in 2005, extended Shiller's analysis to the U.S. housing market, warning that housing prices had reached unsustainable levels. This warning proved prescient when the United States housing bubble collapsed in 2007–2008, triggering the global financial crisis. Shiller's ability to identify these bubbles before they burst established him as one of the foremost authorities on speculative market behavior.

Shiller co-created the S&P/Case-Shiller Home Price Indices (with economists Karl Case and Allan Weiss), which track changes in the value of residential real estate across the United States. These indices became critical tools for monitoring the housing market and are among the most frequently cited housing data in the United States.

Narrative Economics

In his later career, Shiller expanded his research agenda to explore the role of popular narratives—stories that spread virally through populations—in shaping economic behavior. This line of inquiry culminated in his 2019 book Narrative Economics: How Stories Go Viral & Drive Major Economic Events. In the book, Shiller argues that economic fluctuations are driven not only by traditional macroeconomic variables but also by the contagious spread of narratives that influence consumer confidence, investment decisions, and policy choices.

A review of Narrative Economics published by the International Monetary Fund (IMF), written by Jonathan Portes of King's College London, examined Shiller's thesis that viral stories play a central role in driving major economic events. The concept of narrative economics has gained traction among economists and policymakers seeking to understand phenomena such as the rapid spread of economic pessimism during recessions and the role of social media in amplifying market sentiment.

Public Commentary and Policy Engagement

Throughout his career, Shiller has been an active participant in public discourse on economic and financial matters. He has frequently commented on market conditions, economic policy, and the psychological dimensions of economic decision-making.

In May 2025, Shiller offered analysis of the potential economic consequences of tariff policies under the administration of President Donald Trump. Connecticut Public reported that Shiller "sees difficult economic times ahead and draws parallels between today's global trade uncertainty" and previous episodes of protectionist economic policy. His willingness to address current policy debates has made him a frequently consulted voice in financial media and economic policy discussions.

Shiller has also used his public platform to advocate for greater financial literacy and for policy innovations designed to reduce the economic risks faced by ordinary households, including proposals for new types of financial instruments linked to income and housing values.

Recognition

Nobel Memorial Prize in Economic Sciences

In 2013, Shiller was awarded the Nobel Memorial Prize in Economic Sciences, shared with Eugene Fama and Lars Peter Hansen, for their "empirical analysis of asset prices." The Yale Daily News reported that Shiller won the prize on a Monday, recognizing his decades of work demonstrating that asset prices are influenced by factors beyond the predictions of efficient-market models. The joint award was notable for pairing Shiller—whose work emphasized the role of irrational behavior and speculative bubbles in driving asset prices—with Fama, who is closely associated with the efficient-market hypothesis. The Nobel Committee's decision to honor both scholars acknowledged the importance of their respective, and in some respects competing, contributions to understanding financial markets.

Global Economy Prize

In 2018, Shiller received the Global Economy Prize from the Kiel Institute for the World Economy, a German research institution focused on international economic policy. The award recognized Shiller's contributions to understanding global economic dynamics and financial markets.

Influence on Financial Analysis

Beyond formal prizes, Shiller's influence is evident in the widespread adoption of the CAPE ratio as a standard tool of financial analysis. The metric is regularly cited by investment professionals, financial journalists, and central bankers as a benchmark for assessing market valuations. The S&P/Case-Shiller Home Price Indices, which Shiller co-developed, are among the most frequently referenced measures of U.S. housing market conditions and are used by the Federal Reserve, the U.S. Department of the Treasury, and private sector analysts.

Legacy

Shiller's contributions to economics have shaped both academic research and practical financial analysis. His empirical demonstrations of excess volatility in stock prices challenged the prevailing efficient-market consensus of the late twentieth century and helped establish behavioral finance as a recognized field within economics. The CAPE ratio, which he developed, has become a standard reference point for assessing whether equity markets are overvalued or undervalued, and it continues to be applied by analysts and investors globally. In November 2025, NPR's reporting on the CAPE ratio's approach to dot-com era levels illustrated the continued relevance of Shiller's analytical framework to contemporary market debates.

His warnings about speculative bubbles in both the stock market (in 2000) and the housing market (in 2005) were borne out by subsequent events, establishing a track record of identifying systemic risks before they materialized into full-blown financial crises. The S&P/Case-Shiller Home Price Indices remain central to housing market analysis in the United States and have influenced the development of similar indices in other countries.

Shiller's concept of narrative economics, articulated in his 2019 book, has opened a new area of inquiry within the economics profession. By examining how stories spread through populations and influence economic behavior, Shiller has provided a framework for understanding economic phenomena that resist explanation by traditional models focused solely on rational actors and quantifiable variables.

His long tenure at Yale University has produced generations of students trained in the intersection of economics, finance, and psychology. His public engagement—through books, media appearances, and commentary on policy debates—has contributed to broader public understanding of financial markets and their potential vulnerabilities.

As of the mid-2020s, Shiller continued to be an active and frequently consulted voice in discussions of market valuation, international diversification, and the economic implications of policy decisions, including trade policy and the potential formation of new speculative bubbles in areas such as artificial intelligence.