Irrational Exuberance (Second Edition) / Edition 2

Irrational Exuberance (Second Edition) / Edition 2

by Robert J. Shiller
4.4 7
Pub. Date:
Princeton University Press
Select a Purchase Option (Second)
  • purchase options
    $19.01 $35.00 Save 46% Current price is $19.01, Original price is $35. You Save 46%.
    Note: Access code and/or supplemental material are not guaranteed to be included with textbook rental or used textbook.
  • purchase options


Irrational Exuberance (Second Edition) / Edition 2

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

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)

Table of Contents

List of Figures and Tables ... ix
Preface ... xi
Acknowledgments ... xix
One: The Stock Market Level in Historical Perspective ... 3
Two: Precipitating Factors: The Internet, the Baby Boom, and Other Events ... 17
Three: Amplification Mechanisms: Naturally Occurring Ponzi Processes ... 44
Four: The News Media ... 71
Five: New Era Economic Thinking ... 96
Six: New Eras and Bubbles around the World ... 118
Seven: Psychological Anchors for the Market ... 135
Eight: Herd Behavior and Epidemics ... 148
Nine: Efficient Markets, Random Walks, and Bubbles ... 171
Ten: Investor Learning-and Unlearning ... 191
Eleven: Speculative Volatility in a Free Society ... 203
Notes ... 235
References ... 269
Index ... 283

Customer Reviews

Most Helpful Customer Reviews

See All Customer Reviews

Irrational Exuberance 4.4 out of 5 based on 0 ratings. 7 reviews.
Guest More than 1 year ago
Shortly after a 1996 briefing by author Robert J. Shiller, Alan Greenspan, chairman of the U.S. Federal Reserve Board, warned the country about the mood of 'irrational exuberance' that was pushing up stock prices. In hindsight, it¿s clear that the bull was just beginning. Anyone who heeded that warning would have missed nearly unprecedented gains. But Shiller proved prophetic when the market peaked and crashed in 2000, the year he published this book¿s first edition. Shiller isn¿t teaching market timing he¿s debunking cherished investing axioms, such as the belief that stocks or real estate are necessarily great long-term investments. He discredits financial reporting, notes the psychological and emotional factors that make investors behave irrationally, and sounds a note of caution as timely now as it was at the turn of the millennium. This book vaccinates you against the virus of credulity. We suggest a copy for every investor - dog-eared from frequent rereading. It¿s a wise investment.
cez819 More than 1 year ago
Anonymous More than 1 year ago
Anonymous More than 1 year ago
Anonymous More than 1 year ago
Guest More than 1 year ago
An interesting read even today after part of the unwinding of the market in 2001-2003 1stQ. The recent market recovery has also elements of irrationality to it, applying Mr. Schillers' rules to it is a gratifying exercise. The book underestimates perhaps the importance of easy money being made available by the monetary authorities tilting supply in one direction. Otherwise great insights presented in a clear and easily understandable way
Guest More than 1 year ago
Explaing the stock market in the new economy, Robert Shiller recounts how investors are led to speculate as if in this new era there is no downside. He then presents evidence on how mass psychology and behavior promote the speculative bubble. Shiller also discusses how economists and media commentators rationalize higher market levels based on theories about the efficiency and behavior of the new stock market. Finally, the author presents a sober warning on the implications of speculative behavior of investors, institutions and government. The book ends with a number of suggestions for individuals and institutions to minimize the consequences when the bubble will burst. Some of the interesting, and often amusing, observations in the book include the following: Alan Greenspan adopted the term 'irrational exuberance' after Shiller coined that term in his testimony to the Federal Reserve Board meeting presided by Greenspan in December 1996. Greenspan often poses questions rather than offer solutions because he does not know the answers. The overwhelming majority of investors in the stock market are Baby Boomers who did not experienced the great depression. The dominant size and position of the U.S. economy in the world has created the belief that the U.S. stock market can not crash. The uncritical reporting of the media of the degree of speculation for stocks with huge P/E ratios. The universal use of the internet has created an environment for speculation. In conclusion, it appears that Robert Shiller coined the term, irrational exuberance, as a warning. With this book he may have made a prophesy.