Valuation-Informed Indexing #690: Were Shiller’s Research Findings a Surprise?

I’ve posted Entry #690 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Were Shiller’s Research Finding a Surprise?

Juicy Excerpt: I’ve been writing about this strange reaction to Shiller’s research findings for 20 years now, trying to come to a full understanding of it. What I think is going on is that the advance in understanding is so big that we have not as a nation of people been able to process it. For valuations to affect long-term returns, there has to be some secret ingredient in valuations that makes them like no other factor that affects stock prices. Changes in all other factors are incorporated into the stock price quickly. They don’t affect long-term returns, they affect returns immediately. Valuations only have an effect in the long-term.