On December 3, 1996, shiller, along with John Campbell, expressed his views about the market in joint testimony before the Board of Governors of the Federal Reserve system (Campbell and Shiller 1998). Apparently, their testimony had some influence. Two days later, on December 5, Alan Greenspan, chairman of the Federal Reserve Board, shocked global markets when he used the term “irrational exuberance” to describe the state of the U.S. stock market.
Figure 4-3 Fundamental Value versus Actual Price, 1925-1999 Stock prices prices tend to stray from fundamental value for long periods of time. The period after 1994 is especially striking.