Nobel Winner Shiller Joins Pimco in Saying Buy Greek Assets

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Economist Robert Shiller
Robert Shiller, professor of economics at Yale University, who won the Nobel Prize in Economics in 2013 for his modeling of asset-price fluctuations, said that while the situation in Greece is challenging for investors, the stock price of Greek companies failed to reflect their earnings potential. Photographer: Chris Rank/Bloomberg

Investors who have wiped 15 percent off the value of Greek stocks since voters elected a government determined to renegotiate the country’s debts may be overreacting, according to Nobel Prize-winning economist Robert Shiller.

“Investing in Greece right now just might not feel right,” the Yale University economist said Tuesday in London. The price of Greek stocks is “below anything I’ve seen in the U.S. and suggests a spectacular investment,” he said.

Shiller, who won the Nobel Prize in Economics in 2013 for his modeling of asset-price fluctuations, said that while the situation in Greece is challenging for investors, the stock price of Greek companies failed to reflect their earnings potential.

That view echoes the outlook of Pacific Investment Management Co. and hedge fund Greylock Capital Management, which said this week a Syriza-led government hasn’t dimmed their appetite for the country’s bonds. Yields on Greece’s 10-year securities have risen to 10.4 percent since the government was formed on Monday, compared with Germany’s 0.37 percent.

Lorenzo Pagani, a Munich-based money manager at Pimco, which oversees $1.68 trillion of assets, said bond markets overestimate the likelihood of Greece leaving the euro area. That implies favorable opportunities to buy Greek debt in the coming weeks, he said in an interview Tuesday.

The Zeitgeist

Greek bonds and stocks fell for a third day on Wednesday, with equities dropping to their lowest level since September 2012. The benchmark ASE Index has lost 41 percent over the past six months. The Standard & Poor’s 500 Index has risen 3 percent in the same period, having ended 2014 at record highs.

On Monday, Syriza leader Alexis Tsipras formed an anti-austerity coalition government with the Independent Greeks party. Tsipras, 40, has promised to keep Greece in the euro region while renegotiating the terms of Greece’s debt burden.

“You can’t free yourself from the prison of the zeitgeist unless you become a smart beta person and start mechanically doing investments that don’t sound right,” said Shiller on Tuesday. It also makes sense to invest in Russian, Portuguese and Italian equities, according to the model, he said.

Shiller was speaking at a media seminar at Barclays Plc to promote asset-management firm Ossiam’s new exchange traded fund, which will invest in Europe using Shiller’s CAPE model for identifying long-term under and over valuations of equities.

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