Valuation-Informed Indexing #676: Shiller Quantified What Was Previously Thought To Be Non-Quantifiable

I’ve posted Entry #676 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller Quantified What Was Previously Thought To Be Non-Quantifiable.

Juicy Excerpt: Every investor with sense has always known that stock prices were affected both by rational factors (economic developments) and by emotional factors (investors getting overly optimistic or overly pessimistic and sending prices to places not justified by the economic realities. In pre-Shiller days, the trouble was that there was no way to determine how much of the current price was real and how much was emotional mumbo jumbo. The Buy-and-Hold concept was essentially an admission of defeat. The idea was — we cannot know how much emotion is affecting the price so we will just stay at a high stock allocation at all times and hope for the best.

Now we know what we need to know!