The Stock Market in Historical Perspective

Robert Schiller, Yale economist and author, has a short chapter titled “The Stock Market in Historical Perspective (Links to an external site.)”.

In Week 2, you assessed your level of personal financial literacy.  In this assignment, you will expand that perspective to investor behavior in the stock market in general.

This informative article presents data on the historical performance of the U.S. stock market since 1874.  The chart in the diagram illustrates the major stock crashes, most specifically in 1929, 1987, 2000, and the most recent in 2007-08 which preceded the “great recession”.

In addition, this article presents the term “irrational exuberance”, coined by past Federal Reserve Chairman Alan Greenspan.  Another characteristic term discussed is high P/E ratio.

For this assignment, you are to:

  1. Read the article posted above
  2. Locate a contrasting article from an investments publication that discusses the U.S. stock market (current). Investments publications include Barrons, Investor’s Business Daily, Wall Street Journal, Business Week, the Economist, amongst others.
  3. Prepare a short summary of your article, then
  4. Compare and contrast your article w/ the Robert Schiller article.
  5. Your post is to be a minimum of 400 words, to 500 maximum on this topic.

    Please address these points in your post:

  • What, based on your readings, is your assessment on the current state of the U.S. stock market as of today, in relation to the historical picture?  Your assessment requires citation support.
  • In the investment world, a common disclaimer is “past performance is no guarantee of future results”.  How does irrational exuberance impact investors?
  • A picture tells a thousand stories, and each of you may have your own interpretation of the chart (Fig 1.1) in Schiller’s chapter (link above).  What is this picture indicating to you?

You are welcome to address other points that you deem relevant and can support (ie not your opinion).

Mandatory: include the article citation (and hyperlink if possible) for your article.

Review the posts of your classmates and build the discussion by replying thoughtfully.  Students are to respond to at least 3 original posts on this topic.

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