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The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Valuation-Informed Indexing #474: Shiller Showed That Market Timing Is Price Discipline — That Changes Everything

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I’ve posted Entry #474 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller Showed That Market Timing Is Price Discipline — That Changes Everything.

Juicy Excerpt: The conventional line on Shiller is that he showed that valuations affect long-term returns. That’s just a non-provocative way of saying that market timing is price discipline. If valuations affect long-term returns, the risk of buying stocks is different at different valuation levels. If stock investing risk changes with changes in valuation levels, investors who want to keep their risk profile constant over time must adjust their stock allocation when valuations change. That’s market timing. If Shiller is right, market timing must work and market timing must benefit the investors who make use of it.