“I Agree That Stock Markets Have Been Volatile Since Their Creation. The Publication of Shiller’s Research Changed All That. That’s Why He Was Awarded a Nobel Prize. His Research Represents a Revolutionary Change in Our Understanding of How the Stock Market Works.”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

“I believe that our stock market will be less volatile”

Markets have been volatile since their creation. Nothing you can do will change that; it is the nature of the beast. If you can’t handle that volatility you should stay out of the stock market, understanding of course that the decision to do so will mean you miss out on the higher expected returns that go along with the volatility.

I am now close to half way through Four Pillars of Investing, 2nd edition. It really is a fantastic comprehensive book.

I agree that stock markets have been volatile since their creation. The publication of Shiller’s research changed all that. That’s why he was awarded a Nobel prize. His research represents a revolutionary change in our understanding of how the stock market works and of course there are amazing benefits that all stock investors will realize once we have opened every site to civil and reasoned discussion of all of the far-reaching implications of Shiller’s research.

This is why I am constantly repeating my recommendation that we all work together to see that every site is opened to honest posting re the research. A world in which valuations affect long-term returns (the world we live in, according to Shiller’s research) is a very different world from a world in which the market is efficient and there is no need for market timing, the world that the people who developed Buy-and-Hold believed existed in the 1960s, prior to the publication of Shiller’s research.

I only half agree with you re Bernstein’s book. I believe that the chapter on valuations is top-notch. I used to recommend that people read it as a primer on why the shift to Valuation-Informed Indexing is so critical. It does a great job of laying out all the reasons in a concise way. The flaw in the book is that the material in the valuations chapter cannot be reconciled with the material in the other chapters.

Again, opening every site to honest posting is the answer. Just as we all would benefit from hearing Shiller discuss his views on market timing without any of the abusive stuff going on, we would benefit from hearing Bernstein do the same. We are all on the same side. We all want the same things. We should all want to find out what we will all find out once every site has been opened to honest posting and there is no more abusive stuff going on.

That’s where I am coming from re this one, Evidence. My best wishes to you.

Rob