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Boston - New Nobel Prize Economist Thaler Stumped By Record Stock Market

Published on: October 10, 2017 08:36 PM
By: Reuters 
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U.S. economist Richard Thaler, of the University of Chicago Booth School of Business, speaks during a news conference after winning the 2017 Nobel Economics Prize in Chicago, Illinois, U.S. October 9, 2017. REUTERS/Kamil Krzaczynski U.S. economist Richard Thaler, of the University of Chicago Booth School of Business, speaks during a news conference after winning the 2017 Nobel Economics Prize in Chicago, Illinois, U.S. October 9, 2017. REUTERS/Kamil Krzaczynski

Boston - University of Chicago professor Richard Thaler may have won the Nobel Economics Prize on Monday for his work on behavioral economics, but the behavior of investors has him stumped.

Thaler said on Tuesday he is puzzled by the steady rise of global stock markets in recent years, even as many countries are gripped by political and social drama.

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“It’s a mystery to me. That, and the unbelievably low volatility in a time of massive global uncertainty seems mysterious to me,” Thaler said in a phone interview from his Chicago apartment.

Thaler also said his field could do more to research how human psychology affects things like inflation or interest rates.

“Behavioral economists have not invested as much in macro as I would like,” he said.

Thaler spoke as U.S. stocks flirted with new record highs on Tuesday. The S&P 500 index is up roughly 14 percent for the year amid optimism about the economy and corporate profits.

Thaler’s humble tone stood in contrast to the wide acclaim he received Monday when the 72-year-old was awarded the 9 million Swedish crown ($1.1 million) prize for his work on how human nature affects supposedly rational markets.

His research showed how traits such as lack of self-control and fear of loss can prompt decisions that have bad long-term outcomes.

Thaler’s work has been applied in many areas such as auto-enrolling workers into retirement savings plans and adjusting their investments according to their age.

Thaler also has done well outside of the academic world, as part-owner of an $8 billion investment management firm in California, Fuller & Thaler Asset Management. It aims to practice financial theory such as looking for cases where other investors over-reacted and sold off too much of a stock based on bad news.

The firm often focuses on small-cap companies, with market values of $3 billion or less, because there are fewer competing investors and thus more opportunities for gains, he said.

Thaler made a short appearance in the Academy Award-winning 2015 film “The Big Short”, explaining the so-called “hot-hand fallacy” in which past success is expected to also warrant success in the future, with pop star Selena Gomez.

Thaler said he rejected an early version of the script, wanting to be sure he spoke accurately for film audiences.

“If I was going to make a fool of myself in a movie at least I’d get the economics right,” Thaler said.



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Read Comments (4)  —  Post Yours »

1

 Oct 10, 2017 at 11:48 PM Educated Archy Says:

Hah stunned by the Trump surge. Are we sick of winning yet?

2

 Oct 11, 2017 at 11:18 AM yamsar Says:

Reply to #1  
Educated Archy Says:

Hah stunned by the Trump surge. Are we sick of winning yet?

Can you not read? The article states he is puzzled by market behavior in recent “years” what does that have to do with Trump and his foolish cliche of “getting sick of winning”?

3

 Oct 11, 2017 at 01:50 PM Anonymous Says:

Reply to #1  
Educated Archy Says:

Hah stunned by the Trump surge. Are we sick of winning yet?

It is a bubble

4

 Oct 11, 2017 at 04:05 PM Educated Archy Says:

Reply to #3  
Anonymous Says:

It is a bubble

If you truely believe it's a bubble did you short stocks ? Put your money where your mouth is .

I remember when the markets rose after Election Day everyone said it's short lived . It's a bubble etc... but we are still winning . #maga

5

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