Jeremy Siegel is the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania. He's also the author of Stocks for The Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies.

Siegel recently talked with David and Tom Gardner on The Motley Fool Radio Show, and shared his thoughts on the state of the housing market, the stock market, and more. This is the third of three parts.

TMF: In your experience, what is the biggest misconception that students have about the stock market?

Siegel: Oh boy. I think one of the big misconceptions that people have about the market is that they always think there is money moving out of one sector and into another sector or out of stocks and into bonds. That it always goes from one place to the other. What they don't realize is that the market can value everything higher or everything lower. I certainly remember the '70s when bonds crashed and stocks crashed and even real estate was going down, when things were really pessimistic.

So I think one of the misconceptions I see a lot is that there is always money that flows. We always know for every buyer there is a seller. For every seller there is a buyer. So there is really not money that is flowing; it is just people deciding on what the right price for these assets are. I think the important thing to keep in mind when you think about going after returns is that it's not always the case that there is going to be a 10% to 15% return out there. You can be entering a low-return world and you have to come to that realization.

TMF: It is time to play our game "Buy, Sell or Hold." You know the drill. We toss out something and ask whether if it were a stock you would you be buying, selling, or holding. Let's start with the Rocky Balboa of horses: Buy, sell, or hold Seabiscuit?

Siegel: Oooh.  I have not seen the movie. I hear the book is super. The movie got a little mixed reviews. I have got to put that on a hold.

TMF: Next up, the re-election prospects for George W. Bush?

Siegel: I think it is still a buy. Odds makers are saying two-to-one. I think the economy is going to be his ally next year rather than his foe.

TMF: Buy, sell, or hold the Pentagon's futures market on terrorism?

Siegel: (Laughs.) I think that is a sell. I think they have even themselves decided, "Ooh, this was not a good idea -- to put out the way we did."

TMF: How about Philadelphia as a summertime destination?

Siegel:: We've got a new Constitution Center. We've got a number of other new things. I know it is hot here, I know. But seeing the Liberty Bell and everything; that is so important. After 9-11, we value liberty. I am going to put it as a buy. I know the temperature isn't quite right for summer, but with all the new things that we have, I am going to put it as a buy.

TMF:  Professor Jeremy Siegel, author of Stocks for the Long Run. Thanks again for joining us on The Motley Fool Radio Show.

Siegel: Thank you.