Financial Markets: no fear of fear

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By Andrea Beltratti

Are movements on stock markets justified by the movements of dividends? No, according to the Robert Shiller, Nobel Prize winner in Economics, who maintains that it’s the combined actions of investors which create ‘excessive volatility.’ The fluctuations that are typical of share prices are far amplified than those of dividends, revenues, and the GDP, even factoring in the normal variability of interest rates and risk premiums. It’s never easy to ascertain the existence of excessive volatility, because we rarely have the chance to carry out controlled experiments; more often than not we don’t know exactly what moves the markets.