Stock markets in the developed world have risen too much, Robert Shiller, economics professor at Yale, told CNBC Thursday.
On Wednesday, the Dow bounced above and below the psychologically-important 12,000 for much of the session. But stocks look expensive, Shiller said.
"I would say the market is overpriced based on fundamentals … I'm talking about the US and probably Europe," he said.
Patrick Kron, the CEO of Alstom, said that we are in a "dual economy," where things "are moving fast again" in emerging markets while in the developed countries there is still "a wait-and-see attitude."
In the housing market, things are still confusing, despite news Wednesday that new home sales surged to the highest level in eight months, Shiller said.
"I don't think anybody understands the housing market. I think it's inherently psychological," he said.
In the US and in the UK, prices fell sharply after the crisis struck but then they came back up, only to fall again.
"That story has something to do with pulling out of Depression fear after what happened to Lehman," Shiller said.
But now "we may see a downturn in home prices," he added.