Is the Market Over- or Under-Valued?

Greg Mankiw posts this interesting debate between Robert Shiller (Irrational Exuberance) and Jeremy Siegel (Stocks For The Long Run) on whether the stock market is overvalued.


I'm basically in the Shiller camp. Corporate profits have been unusually high for the last few years, as weak firms went out of business and firms shed their workforce.  The S&P 500's price-to-earnings ratio is in the high end of its historical range.  It's still within its historical range, to be sure, but after a punishing recession, and with further storm clouds on the horizon, that seems to me to point to a least some level of overvaluation.  That doesn't necessarily mean it will fall.  Rather, it means that it is more likely to deliver lower returns in the future.
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

The Best 71-Second Animation You'll Watch Today

A rock monster tries to save a village from destruction.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

The Best 71-Second Animation You'll Watch Today

A rock monster tries to save a village from destruction.

Video

The Case for Napping at Work

Most Americans don't get enough sleep. More and more employers are trying to help address that.

Video

A Four-Dimensional Tour of Boston

In this groundbreaking video, time moves at multiple speeds within a single frame.

Video

Who Made Pop Music So Repetitive? You Did.

If pop music is too homogenous, that's because listeners want it that way.

Video

Stunning GoPro Footage of a Wildfire

In the field with America’s elite Native American firefighting crew

More in Business

Just In