Irrational Exuberance: Second Edition / Edition 2

Irrational Exuberance: Second Edition / Edition 2

4.4 7
by Robert J. Shiller
     
 

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

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Overview

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

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Product Details

ISBN-13:
9780691123356
Publisher:
Princeton University Press
Publication date:
02/22/2005
Edition description:
Second
Pages:
344
Product dimensions:
6.44(w) x 10.36(h) x 1.07(d)

Meet the Author

Robert J. Shiller is the Stanley B. Resor Professor of Economics at Yale University. He is author of Market Volatility and Macro Markets, which won the 1996 Paul A. Samuelson Award.

Table of Contents

1The stock market in historical perspective1
2The real estate market in historical perspective11
3Precipitating factors : the capitalist explosion, the internet, and other events31
4Amplification mechanisms : naturally occurring Ponzi processes56
5The news media85
6New era economic thinking106
7New eras and bubbles around the world132
8Psychological anchors for the market147
9Herd behavior and epidemics157
10Efficient markets, random walks, and bubbles177
11Investor learning - and unlearning195
12Speculative volatility in a free society207

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