The Yale School of Management Stock Market Confidence Indexes™ Reveal Investor Confidence Sliding

New Haven, September 3, 2002 - The stock market is down 20% since the beginning of the year (as measured by the Standard & Poors 500), and The Yale School of Management Stock Market Confidence Indexes™ directed by Robert Shiller, author of the bestseller Irrational Exuberance, show that individual and institutional investor confidence is steadily sliding. Professor Shiller offers insight:

-- Buy-On-Dips Confidence has dropped sharply in the last seven months. There is significantly less confidence in the resilience of the market, and this may help explain the market's decline. People will be less inclined to hold stocks if they think that they are less assured to hold their value.

-- One-Year Confidence Index appears to be sliding, but is still relatively at a high level. The One-Year Confidence Index shows, both for individual and institutional investors, that nearly 86% of investors expect the market to go up in the succeeding twelve months.

-- The Crash Confidence Index is also down and people are increasingly thinking that a 1987-style stock market crash may be mounting especially for individual investors.

-- The Valuation Confidence Index is up for both individual and institutional investors. After the fall in stock prices, confidence in the market is close to the historical average.

Shiller's Interpretation
"Most significant about the new data is that the Buy-on-Dips Confidence Index has slid a lot since the last measurement period. This means that people are reasonably confident in the value of the market, but are not as confident that it will rebound or will not crash. The data also suggests that Americans are not sure about the short run," said Professor Shiller.

His newest research study, "The Yale School of Management Stock Market Confidence Indexes™ ," represents the longest-running comprehensive effort to measure investor confidence and attitudes in the world (for both individual and institutional investors).

The indexes that Professor Shiller routinely measures include:

1. One-Year Confidence Index: The percent of the population expecting an increase in the Dow in the coming year.

2. Buy-On-Dips Confidence Index: The percent of the population expecting a rebound the next day should the market ever drop 3% in one day.

3. Crash Confidence Index: The percent of the population who attach little probability to a stock market crash in the next six months.

4. Valuation Confidence Index: The percent of the population that thinks the market is not too high.

Data Collection 
Data for The Yale School of Management Stock Market Indexes™  are collected under Professor Shiller's supervision at the Yale School of Management's International Center for Finance. Surveys were initially conducted at six-month intervals. Starting in July 2001, for the U.S. surveys, he reports a monthly six-month average. For example, the number for January 2002 is an average of results from surveys between August 2001 and January 2002. Sample size has averaged a little over one hundred per six-month interval since the beginning of the surveys. This means that standard errors are typically plus or minus five percentage points. A parallel effort to sample Japanese investor attitudes has been undertaken since 1989 by Professor Yoshiro Tsutsui of Osaka University and Fumiko Kon-Ya of the Japan Securities Research Institute.

Biographical
Robert J. Shiller is a Faculty Fellow at the Yale School of Management's International Center for Finance. He is also the Stanley B. Resor Professor of Economics at the Cowles Foundation for Research in Economics at Yale University. His latest book, Irrational Exuberance (Princeton University Press 2000, Broadway Books 2001), is an analysis and explication of the stock market boom since 1982. It won the Commonfund Prize in 2000 and was a New York Times nonfiction bestseller. Shiller's forthcoming book will be released in spring 2003.

For an interview with Professor Shiller, contact Media Relations at the Yale School of Management, (203) 432-6010.