Finance has spent 40+ years defending a theory this chart seriously damages. In 1981, Robert Shiller asked a simple question: If stock prices reflect future dividends, why are they so much more volatile than the dividends themselves? 📌 Save this post. This is post #2 of 8 in the "Excess Volatility Puzzle" series. The full series is worth following start to finish. He tested it with one of the most important charts in finance. Shiller plotted two lines from 1871 to 1979: The first was actual stock prices. The second was what prices should have looked like if they rationally reflected the dividends that eventually came. The result was the problem. Actual prices swung wildly. Rational prices barely moved. Stocks were 5 to 13 times more volatile than the fundamentals justified. Not 10% more volatile. Not 50% more volatile. 5 to 13 times. That is not a small flaw in the theory. It is the flaw. If markets were truly efficient, those two lines should move closely together. They don’t. And they never did. That chart matters because it forces a much bigger question: If price is supposed to be a rational reflection of value, why has it behaved so differently from value for so long? This is one of the clearest reasons markets are driven by more than information. They are driven by narrative, psychology, and waves of belief that fundamentals alone cannot explain. I mentioned in my last post that markets are wrong more often than they are right. Shiller’s chart is the first 108 years of evidence. And the puzzle he identified in 1981 has only become more interesting since. In the next post, I’ll show what happened when researchers extended the data beyond 1979 and why the case against market efficiency got even harder to ignore. Comment "1981" plus make sure we're connected: And I will DM you the Robert Shiller 1981 Report🤝 To not miss a series post:  ➕ Follow Chris Murphy, CFA Murphy and ring the bell 🔔 Post #1: https://bit.ly/4dhj1dr Post #2: This post. Post #3 is coming Sunday. --- Repost to help educate your network ♻️ Substack and Newsletter Launching soon, subscribe for day one access. https://longrace.com https://chrismurphyhq.com