Irrational Exuberance is a March 2000 book written by Nobel Prize-winning Yale University professor Robert J. Shiller,
did you read it?
In his 2006 book
Irrational Exuberance, Robert Shiller argues that high stock market valuations in 2000 and 2005 were unjustified. The text opens with Shiller examining the historic valuations (based on PE ratios) in the two periods, which were well above those seen at prior peaks in 1901, 1929 and 1966. This book, however, is not about valuation. Instead, the author identifies a series of factors that brought about these speculative excesses, focusing on
12 factors that facilitated big market moves from 1995 to 2000 and from 2002 to 2005. Shiller then goes on to explain the mechanisms that amplified these factors. The book also covers cultural and psychological influences that further contribute to irrational decision-making when it comes to making investments.
Shiller, after explaining the human instinct to rationalize this irrational behavior, then offers some solutions to prevent future speculative bubbles.
Did you read it?
Irrational Exuberance Revised and Expanded Third Edition 2016
In this revised, updated, and expanded edition of his
New York Times bestseller, Nobel Prize–winning economist
Robert Shiller, who warned of both the tech and housing bubbles, cautions that signs of irrational exuberance among investors have only increased since the 2008–9 financial crisis. With high stock and bond prices and the rising cost of housing, the post-subprime boom may well turn out to be another illustration of Shiller's influential argument that psychologically driven volatility is an inherent characteristic of all asset markets. In other words,
Irrational Exuberance is as relevant as ever. Previous editions covered the stock and housing markets—
and famously predicted their crashes.
This edition expands its coverage to include the bond market, so that the book now addresses all of the major investment markets. It also includes updated data throughout, as well as Shiller's 2013 Nobel Prize lecture, which places the book in broader context. In addition to diagnosing the causes of asset bubbles,
Irrational Exuberance recommends urgent policy changes to lessen their likelihood and severity—and suggests ways that individuals can decrease their risk before the next bubble bursts. No one whose future depends on a retirement account, a house, or other investments can afford not to read this book.
If your guy Ken Fisher predicted and explained market crashes, then he should have a Nobel Prize too.
