Rajat gupta
Ton up Member
What do we mean by "systematic forecast errors" in Shiller'sproposition of Excessive Volatility?
Explanation by Sir John:-
Whilst a share price is theoretically the discounted value of all future dividends, we're not going to always get this right. However, Shiller's point was that whilst we might get it wrong (forecast error), we should not systematically get it wrong in the same way. This suggests we are systematicallyover-estimating or under-estimating the price.
Explanation by Sir John:-
Whilst a share price is theoretically the discounted value of all future dividends, we're not going to always get this right. However, Shiller's point was that whilst we might get it wrong (forecast error), we should not systematically get it wrong in the same way. This suggests we are systematicallyover-estimating or under-estimating the price.