Nobel Prize economist warns of U.S. stock market bubble

BERLIN Sun Dec 1, 2013 7:40pm IST

Robert Shiller, one of three American scientists who won the 2013 economics Nobel prize, attends a press conference in New Haven, Connecticut October 14, 2013.

Robert Shiller, one of three American scientists who won the 2013 economics Nobel prize, attends a press conference in New Haven, Connecticut October 14, 2013.

Related Topics

BERLIN (Reuters) - An American who won this year's Nobel Prize for economics believes sharp rises in equity and property prices could lead to a dangerous financial bubble and may end badly, he told a German magazine.

Robert Shiller, who won the esteemed award with two other Americans for research into market prices and asset bubbles, pinpointed the U.S. stock market and Brazilian property market as areas of concern.

"I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets," Shiller told Sunday's Der Spiegel magazine. "That could end badly," he said.

"I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable," he said, describing the financial and technology sectors as overvalued.

He had also looked at "drastically" higher house prices in Rio de Janeiro and Sao Paulo in Brazil in the last five years.

"There, I felt a bit like in the United States of 2004," he said, adding he was hearing arguments about investment opportunities and a growing middle class that he had heard in the United States around the year 2000.

The collapse of the U.S. housing market helped trigger the 2008-2009 global financial crisis.

"Bubbles look like this. And the world is still very vulnerable to a bubble," he said.

Bubbles are created when investors do not recognise when rising asset prices get detached from underlying fundamentals.

(Reporting by Madeline Chambers; Editing by Mark Potter)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Jaitley's Health

Jaitley's Health

Finance minister back in hospital for check-up.  Full Article 

Modi's U.S. Visit

Modi's U.S. Visit

Modi to observe strict fast during maiden trip to U.S.  Full Article 

Mangalyaan

Mangalyaan

India's Mars mission a step closer to success with engine test  Full Article 

Shortage of Coal

Shortage of Coal

Coal import rush leads to port congestion  Full Article 

Alibaba IPO

Alibaba IPO

IPO ranks as world's biggest after additional shares sold   Full Article 

Bumper Sales

Bumper Sales

Apple sells more than 10 mln new iPhones in first three days  Full Article 

Asian Games 2014

Asian Games 2014

Full coverage of the 17th Asian Games as Incheon.  Full Coverage 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage