Irrational Exuberance

Irrational Exuberance

Book - 2005 | 2nd ed
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This first edition of this book was a broad study, drawing on a wide range of published research and historical evidence, of the enormous stock market boom that started around 1982 and picked up incredible speed after 1995. Although it took as its specific starting point this ongoing boom, it placed it in the context of stock market booms generally, and it also made concrete suggestions regarding policy changes that should be initiated in response to this and other such booms. The book argued that the boom represents a speculative bubble, not grounded in sensible economic fundamentals. Part one of the book considered structural factors behind the boom. A list of twelve precipitating factors that appear to be its ultimate causes was given. Amplification mechanisms, naturally-occurring Ponzi processes, that enlarge the effects of these precipitating factors, were described. Part Two discussed cultural factors, the effects of the news media, and of "new era" economic thinking. Part Three discussed psychological factors, psychological anchors for the market and herd behavior. Part Four discussed attempts to rationalize exuberance: efficient markets theory and theories that investors are learning. Part Five presented policy options and actions that should be taken.

The second edition, 2005, added an analysis of the real estate bubble as similar to the stock market bubble that preceded it, and warned that "Significant further rises in these markets could lead, eventually, to even more significant declines. The bad outcome could be that eventual declines would result in a substantial increase in the rate of personal bankruptcies, which could lead to a secondary string of bankruptcies of financial institutions as well. Another long-run consequence could be a decline in consumer and business confidence, and another, possibly worldwide, recession." Thus, the second edition of this book was among the first to warn of the global financial crisis that began with the subprime mortgage debacle in 2007.

Publisher: Princeton, N.J. : Princeton University Press, c2005
Edition: 2nd ed
ISBN: 9780691123356
0691123357
Branch Call Number: 332.63222 SHI 2005
Characteristics: xxv, 304 p. cm

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StarGladiator
Mar 29, 2015

One thing I didn't know but learned from reading Michael Hirsh's book, Capital Offense, was that Prof. Shiller was fired from his advisory role to the NY Federal Reserve Bank - - after 14 years - - by the new chair, TImothy Geithner, after he raised the possibility of falling housing rates! [Prof. Shiller was prophesying the meltdown.] And replaced with Catherine Mann, a real shill of the first order from academia and the Peterson Institute. Excellent book, and although not a Shiller fan, I believe he is entirely, albeit on the conservative side, correct! I do differ with Prof. Shiller's opinion on the market, given the existence of rigging by way of internalization process [top hedge funds and banks buy up the public trades, and perform them on their own systems, hence insider knowledge at the big data level].

s
StarGladiator
Mar 01, 2015

One thing I didn't know but learned from reading Michael Hirsh's book, Capital Offense, was that Prof. Shiller was fired from his advisory role to the NY Federal Reserve Bank - - after 14 years - - by the new chair, TImothy Geithner, after he raised the possibility of falling housing rates! And replaced with Catherine Mann, a real shill of the first order, the so-called economist who promotes jobs offshoring based upon the ASSUMPTION, that for each job offshored, two jobs are magically created in America! Excellent book, and although not a Shiller fan, I believe he is entirely, albeit on the conservative side, correct! [As was Iris Mack, who questioned Harvard's derivatives position, fired by Larry Summers and company.]

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fpm
Jul 03, 2014

I'd heard that this book was a classic. It deserves that status, showing with clear statistics and descriptions how the stock market depends mostly on the herd following one another. It's a far cry from depending on rational capitalists as many suppose - and unnerving in its implications to public policy.

l
Lukeinvancouver
Sep 27, 2012

This is a must read for anybody interested in the dynamics and inherent instability of financial markets. It is not easy to read and requires a basic knowledge of economics and statistics to full appreciate the book. The first edition was published just before the meltdown of markets in March 2000. Professor Shiller was also one of the few people who foresaw the collapse of the US housing market and the negative consequences around the world that followed from it. Robert J. Shiller together with his colleague Karl Case are the authors of the widely quoted Case-Shiller housing index

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21288004246712
Oct 20, 2008

great timing

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