Tags: Robert Shiller | Bubble | Economy | Age of Anxiety

Yale's Shiller: 'Good Investing Is a Little Bit Like Diagnosing a Mental Illness'

By    |   Wednesday, 13 May 2015 12:42 PM

Nobel laureate economist Robert Shiller says there is no good investing without exploring and understanding the way people's minds work.

"Good investing is a little bit like diagnosing a mental illness, because you have to understand the pricing of assets to find something that is underpriced for now and will improve later,” he told Credit Suisse.

“So that means understanding the origins of people's thinking. It puts you even closer to a psychiatrist than you might like to think."

Shiller has touted a concept known as "behavioral finance." He told Credit Suisse he thinks "the human brain is wired for stories." He believes news coverage is a strong factor behind investment decisions, Credit Suisse reported.

Shiller describes today’s world as "the age of anxiety."

And while technological advances can be viewed as providing great advances in society, some wonder if they also don’t damage other aspects – and possible make the world a more dangerous and uncertain place.

"It's leading to a sense of a different world that is much riskier for individuals than it used to be. And it's also an unequal world. I think the fear of inequality is amplifying now," he said.

So with a 24-7 news cycle and all of the in-depth coverage, some experts question if stories about stock market bubbles and volatility are only self-fulfilling prophecies.

Shiller himself said he is "concerned about overpricing and concerned about the kind of stories that are circulating now."

Meanwhile at Berkshire Hathaway's annual meeting, Warren Buffett shared some of the secrets to his decades of investing success.

Among his tips, successful investing “requires a certain emotional stability” and “exceptional focus,” CNNMoney reports.

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Nobel laureate economist Robert Shiller says there is no good investing without exploring and understanding the way people's minds work.
Robert Shiller, Bubble, Economy, Age of Anxiety
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2015-42-13
Wednesday, 13 May 2015 12:42 PM
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