This morning, the Nobel Prize in Economic Science went to three American professors -- Eugene F. Fama (U. Chicago), Lars Peter Hansen (U. Chicago) and Robert J. Shiller (Yale) — "for their empirical analysis of asset prices." In his own way, each economist has demonstrated that "stock and bond prices move unpredictably in the short term but with greater predictability over longer periods," and that markets are "moved by a mix of rational calculus and human behavior," writes The New York Times.
Of the three economists, Robert Shiller is perhaps the most household name. In March 2000, Shiller published Irrational Exuberance, a book that warned that the long-running bull market was a bubble, that stock prices were being driven by human psychology, not real values. Weeks later, the market cracked and people began to pay attention to what Shiller had to say. Fast forward a few years, and Shiller released a second edition of the same book, this time arguing that the housing market was the latest and greatest bubble. We all know how that prediction played out.
Shiller's thinking about the financial markets isn't a mystery. It's all on display in his Yale course simply called Financial Markets. Available for free on YouTube, iTunes Video, and Yale's web site, the 23 lecture-course provides an introduction to "behavioral finance principles" necessary to understand the functioning of the securities, insurance, and banking industries. Recorded in 2011, the course is otherwise listed in the Economics section of our collection of 1200 Free Online Courses. You can watch all of the lectures above, starting with Lecture 1. By following these links, you can find the course syllabus, an outline of the weekly sessions, and a book list.
Personal Note: About 10 years ago, I worked with Prof. Shiller on developing an online course. Two things I recall about him. First, he struck me as being a very down-to-earth and unassuming guy. A pleasure to work with. Second, we had some time to kill one day, and so I asked him (circa 2005) whether it was crazy to buy a house. I mean, I had the guru sitting in front of me, in a chatty mood. What did I get? Bupkis: "You know, it just depends..." It wasn't a bullish sign. So I took it to mean "Stay on the sidelines, kid." In 2007, it seemed like sound advice.
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