Robert Shiller, a professor of economics at Yale University, made a prediction in 2005 that a massive bubble was developing in the housing market, and was proved right just two years later, it seemed a mortal blow for classical finance. Shiller is one of the founders of behavioral finance, a school of economics that believes that the psychological behavior of investors can have a big impact on markets. As he had done with his earlier prescient forecast of “irrational exuberance” in the stock market bubble of the late ’90s, Shiller seemed to be staging a direct attack on the Efficient Market Hypothesis (EMH), which University of Chicago economist Eugene Fama had developed three decades earlier. According to Fama, investors are always rational, and markets accurately reflect all publicly known information. In this utopian world, securities will always be appropriately priced, and no amount of analysis can result in outperformance. Shiller,...