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	Cyclically adjusted price-to-earnings ratio (CAPE/Shiller P/E), behavioral finance, housing market analysis, 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. One of the most influential figures in modern financial economics, Shiller received the Nobel Memorial Prize in Economic Sciences in 2013 for his "empirical analysis of asset prices," sharing the award with Eugene Fama and Lars Peter Hansen. His research spans behavioral finance, real estate economics, and the role of psychology and narrative in shaping economic events. Shiller is the co-creator of the S&P/Case-Shiller Home Price Indices and the originator of the cyclically adjusted price-to-earnings ratio, commonly known as the CAPE ratio or Shiller P/E ratio, which has become a standard tool for assessing stock market valuations. Throughout his career, Shiller has warned of speculative bubbles in both the stock and housing markets, most notably before the dot-com crash of 2000 and the housing crisis of 2007–2008. His books, including Irrational Exuberance and Narrative Economics, have shaped public and scholarly discourse on the intersections of human behavior 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 the Detroit metropolitan area during the postwar economic boom, Shiller was exposed early to the dynamics of American industry and enterprise. The environment of mid-century Detroit — a city defined by manufacturing, cyclical economic fortunes, and the intersection of technological innovation and labor — would later resonate in Shiller's academic interest in how economic narratives and psychological forces shape markets and communities.

Details about Shiller's childhood and family life beyond his father's profession remain limited in published sources. However, his upbringing in an entrepreneurial household appears to have influenced his later intellectual curiosity about the forces that drive economic decision-making, risk-taking, and the stories people tell themselves about financial prospects.

Education

Shiller pursued higher education in economics, ultimately earning his doctorate. He received his Ph.D. in economics from the Massachusetts Institute of Technology (MIT). His graduate training at MIT exposed him to both the rigorous quantitative methods that would define his empirical research and the emerging questions in financial economics about market efficiency and asset pricing that would become central to his career. After completing his doctoral studies, Shiller embarked on an academic career that would eventually bring him to Yale University, where he has remained for decades as a member of the economics faculty.

Career

Academic Career at Yale University

Shiller joined the faculty of Yale University, where he rose to the rank of Sterling Professor of Economics — one of the highest academic honors bestowed by the university. As a longtime Yale economist, Shiller has conducted research across a broad range of topics in financial economics, macroeconomics, and behavioral economics. His tenure at Yale has been marked by prolific scholarship, the development of influential financial tools and indices, and sustained engagement with both academic audiences and the broader public.

At Yale, Shiller has mentored generations of graduate students and has contributed to the university's reputation as a leading center for research in behavioral finance and asset pricing. His work has consistently challenged prevailing orthodoxies in economics, particularly the efficient-market hypothesis, by demonstrating the significant role that human psychology, social dynamics, and cultural narratives play in the determination of asset prices.

The CAPE Ratio (Shiller P/E Ratio)

Among Shiller's most enduring contributions to financial economics is the cyclically adjusted price-to-earnings ratio, widely known as the CAPE ratio or Shiller P/E ratio. The CAPE ratio assesses the stock market's pricing by adjusting past earnings for inflation over a ten-year period, thereby smoothing out short-term fluctuations in corporate earnings and providing a longer-term perspective on market valuations. Unlike the standard price-to-earnings ratio, which relies on a single year of earnings data and can be distorted by business cycle effects, the CAPE ratio offers a more stable and historically grounded measure of whether stocks are overvalued, undervalued, or fairly priced relative to their earnings history.

The Shiller P/E ratio has become one of the most widely followed indicators among investors, analysts, and financial commentators. It has been used to identify periods of potential overvaluation in the stock market, including the run-up to the dot-com crash of 2000 and subsequent market corrections. As of November 2025, the Shiller P/E ratio was reported to be approaching levels seen in November 1999, just before the dot-com bubble burst, raising questions about whether an AI-driven bubble might be forming in equity markets.

Shiller's CAPE ratio has also been applied to international markets, where it has been used to compare valuations across countries and regions. In early 2026, analysis drawing on the CAPE framework highlighted the stark divergence in valuations between U.S. stocks and international markets, with some commentators citing Shiller's work in arguing that international stocks might offer better long-term returns given the relatively elevated pricing of the U.S. market.

Case-Shiller Home Price Indices

Shiller, in collaboration with economist Karl Case, developed the S&P/Case-Shiller Home Price Indices, a series of indices that track changes in the value of residential real estate across the United States. The indices, which use a repeat-sales methodology to measure price changes in the same properties over time, have become the standard benchmark for tracking trends in the U.S. housing market. They are widely referenced by policymakers, real estate professionals, and journalists as authoritative measures of housing price movements.

The development of the Case-Shiller indices was motivated in part by Shiller's research into speculative bubbles in housing markets. By creating a rigorous, transparent, and publicly available measure of housing prices, Shiller and Case provided a tool that enabled researchers, investors, and regulators to more accurately assess whether housing markets were experiencing unsustainable price increases. The indices gained particular prominence during the mid-2000s U.S. housing bubble and the subsequent financial crisis, as they documented the dramatic rise and fall of home prices across the country.

Behavioral Finance and Speculative Bubbles

Shiller is one of the foundational figures in behavioral finance, a field that integrates insights from psychology and other social sciences into the study of financial markets. His research has demonstrated that asset prices frequently deviate from the values predicted by standard models based on efficient markets and rational expectations. Instead, Shiller has argued, prices are significantly influenced by investor psychology, herd behavior, media narratives, and social contagion effects.

His 2000 book Irrational Exuberance — published at the peak of the dot-com bubble — warned that U.S. stock prices had reached unsustainable levels driven by speculative excess and irrational investor behavior. The book's title, borrowed from a phrase used by Federal Reserve Chairman Alan Greenspan in 1996, became a widely recognized shorthand for the dangers of speculative manias. When the dot-com crash followed shortly after the book's publication, Shiller's reputation as a prescient analyst of market bubbles was firmly established.

Shiller subsequently updated Irrational Exuberance in 2005 to include analysis of the U.S. housing market, warning that housing prices had likewise entered bubble territory. The housing crash and global financial crisis of 2007–2008 further validated his analysis and brought renewed attention to his work on the role of speculation and psychology in asset pricing.

Narrative Economics

In his later career, Shiller expanded his research agenda to encompass the concept of "narrative economics" — the study of how popular stories and narratives spread virally through the population and influence economic behavior and outcomes. His 2019 book Narrative Economics: How Stories Go Viral & Drive Major Economic Events presents a systematic framework for understanding how narratives about economic conditions, technological innovations, and policy changes can shape consumer confidence, investment decisions, and macroeconomic trends.

In Narrative Economics, Shiller draws on epidemiological models to describe how economic narratives spread in a manner analogous to the transmission of infectious diseases, rising in prominence, reaching a peak, and then fading, only to re-emerge in mutated forms in subsequent periods. He applies this framework to historical episodes including the Great Depression, the rise of the "new economy" narrative in the late 1990s, and various real estate booms.

The book has been reviewed and discussed in academic and policy circles. A review published by the International Monetary Fund, written by Jonathan Portes of King's College London, examined Shiller's thesis and its implications for understanding how viral stories drive major economic events.

Public Commentary and Policy Engagement

Throughout his career, Shiller has been an active public commentator on economic and financial issues, contributing regularly to news media, academic journals, and public policy discussions. He has used his platform to warn about asset price bubbles, advocate for financial innovation that protects ordinary consumers, and discuss the psychological dimensions of economic policy.

In May 2025, Shiller publicly commented on the potential economic consequences of tariff policies under the Trump administration, warning that aggressive tariff tactics could spur economic pain and drawing parallels between the global trade uncertainty of the period and historical episodes of protectionism. His commentary reflected a broader pattern throughout his career of applying historical and behavioral analysis to contemporary economic policy debates.

In November 2025, Shiller issued a long-term forecast for U.S. stocks that highlighted the possibility of subdued returns over the following decade, given the elevated levels of the CAPE ratio. He emphasized the premise that investors should diversify their portfolios beyond U.S. equities, pointing to the relatively more attractive valuations available in international markets. This warning attracted considerable media attention and was subsequently cited in analyses of international stock market prospects heading into 2026.

Recognition

Nobel Memorial Prize in Economic Sciences

In 2013, Shiller was awarded the Nobel Memorial Prize in Economic Sciences, which he shared with Eugene Fama and Lars Peter Hansen. The Royal Swedish Academy of Sciences cited all three laureates for their "empirical analysis of asset prices." The award recognized Shiller's contributions to understanding how asset prices move over time, particularly his demonstrations that stock prices exhibit excess volatility relative to what would be predicted by models based solely on changes in dividends and other fundamentals. His work showed that while asset prices are difficult to predict in the short run, they display predictable patterns over longer horizons — a finding that has had profound implications for investment practice and financial regulation.

The Nobel Prize brought wider public recognition to Shiller's decades of research and reinforced his status as one of the leading economists of his generation. The award was noted in the Yale Daily News, which reported that the Yale community celebrated the honor for one of its most prominent faculty members.

Global Economy Prize

In 2018, Shiller was awarded the Global Economy Prize by the Kiel Institute for the World Economy, an honor recognizing his contributions to the understanding of the global economy. The Kiel Institute highlighted Shiller's research on asset prices, speculative bubbles, and behavioral finance as central to his selection for the prize.

Other Honors

Shiller's work has been recognized through numerous other honors and distinctions throughout his career, including fellowships and honorary degrees. His CAPE ratio and Case-Shiller Home Price Indices are among the most widely used financial tools in the world, a form of recognition that extends beyond formal awards to reflect the practical impact of his research on financial markets, investment practice, and economic policy.

Legacy

Robert Shiller's contributions to economics have shaped both academic research and practical finance in lasting ways. His insistence on the importance of human psychology, narrative, and irrational behavior in financial markets challenged the dominance of efficient-market theory and helped establish behavioral finance as a major field within economics. The CAPE ratio, which he developed, has become a standard tool for assessing long-term stock market valuations and continues to be cited in major financial analyses decades after its introduction. As of late 2025, the CAPE ratio was the subject of widespread discussion as it approached levels associated with previous market bubbles, underscoring the ongoing relevance of Shiller's analytical framework.

The Case-Shiller Home Price Indices transformed the measurement and monitoring of U.S. housing markets, providing a transparent and reliable benchmark that has been used by regulators, policymakers, and market participants to assess housing market conditions. The indices played a critical role in documenting the 2000s housing bubble and its aftermath, and they remain the standard reference for U.S. residential real estate price trends.

Shiller's concept of narrative economics has opened a new avenue of research in the social sciences, encouraging scholars to investigate how popular stories and their viral spread influence economic behavior. By drawing on epidemiological models and interdisciplinary methods, Shiller has broadened the toolkit available to economists and social scientists seeking to understand the forces that drive major economic events.

Beyond his academic contributions, Shiller has served as a model for the publicly engaged economist — one who combines rigorous scholarship with accessible communication and a willingness to address pressing policy questions. His warnings about speculative excess, his advocacy for financial innovation that serves the public interest, and his engagement with media and policy audiences have set a standard for the role that academic economists can play in public life.

As economic conditions in the mid-2020s raised new questions about asset price sustainability, trade policy, and the impact of technological change, Shiller's research and public commentary continued to be cited as essential reference points for understanding the challenges and uncertainties facing the global economy.