Australians should expect further share price falls because economic fundamentals are being overridden by “panic,” says Ron Bird, professor of finance at the University of Technology Sydney.

“In times like this valuation means nothing,” says Bird, who is also director of the Paul Wooley Centre for the Study of capital market dysfunctionality. “During the majority of time valuation only plays a small part in equity markets.”

But Bird won’t pick a bottom. That is foolish, he says.

“It’s either optimism or pessimism,” says Bird. “We slip from one extreme to the other.”

He says stock markets are too expensive.

“Equity markets in general are over-priced,” says Bird. “People who say ‘be patient’ are inadequate. What they’re saying is ‘I’m hopeless. I don’t know what is going on’.”

Bird believes excessively optimistic reporting by the news media over many years has helped skew markets beyond their fundamental value.

“No one wants to sound pessimistic,” says Bird, who has worked at Towers Perrin and Westpac Investment Management. “TV has distorted our judgement.”

He believes markets are going through a third plunge related to earlier market crashes, the Internet bubble and the credit bubble.

“We’ve overspent for 25 years and you don’t get out of that in a blink of the eye,” says Bird. “Greenspan was the worst central bank in living memory. He ran markets as part of a popularity contest, giving them excessive liquidity.”

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