Stocks Could Drop Even More in Reaction to Japan: Shiller

If history repeats itself, the worldwide stock market could tumble even more this Friday—a week after a Japan was devastated by an earthquake and tsunami, Yale economist Robert Shiller told CNBC Monday.

"We could see significant drop this Friday,” said Shiller, who is also the co-creator of the S&P/ Case-Shiller Housing Index, which tracks US housing prices.

“That would be too precise a mirror of what happened in ’95, but it’s the kind of thing to watch out for."

Shiller said after the Kobe earthquake in 1995, the stock markets globally plummetedone week later, and the Nikkei dropped 5 percent in one day.

“The stock market is long-term market: It prices the indefinite future, and it’s very vulnerable to news stories that suggest new information and new emotions relating to that,” he added.

Shiller said what’s coming to fore now is incompetence on the part of Japanese planners, in that adequate contingencies weren’t in place. He added that stories of “human failure” erodes= confidence in Japan and the world over.

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