Irrational Exuberance

Author: Robert J. Shiller
Publisher: Broadway Business
Released: 2006

Editorial Reviews:
Given the title of Mr. Shiller's book, you can guess the punch line. He makes a powerful case that the soaring stock market of recent years is a huge, accidental Ponzi scheme in progress, one that will come to a very bad end. The book actually focuses on the market broadly defined (most numbers are for the S.&P. 500), but it reads even better as a tale of the tech stocks". -- Paul Krugman, The New York Times

"Shiller has provided an accessible guide to the usually impenetrable literature on financial markets, especially the American stock market." -- Foreign Affairs

"This is an excellent book by a distinguished scholar. It raises an issue of the utmost importance for the U.S. economy and presents a persuasive case that the U.S. stock market may be significantly overvalued. It is well written for a popular as well as a professional readership." -- Michael Brennan, Anderson School of Management, University of California, Los Angeles

A must-read . . . refreshing, well-reasoned . . . and very readable. -- Michael P. Niemira, Barron's

He compares the Internet stockmarket boom with market conditions that have applied in the United States over the past 130 years. His research reveals that at no time in recorded history has there been such a disparity between stock prices and the earnings that those prices are supposed to capture. -- Maximilian Walsh, Australasian Business Intelligence: The Bulletin

Irrational Exuberance should be compulsory reading for anybody interested in Wall Street or financially exposed to it; at the moment that would be roughly everybody in the United States, from Alan Greenspan down to the proverbial shoe-shine boy. -- The Economist

May be one of the most important books on higher education.... It is certainly one of the most interesting. -- Louis Menand, The New Yorker

No one else has examined the behavior of the American investor in the 1990s with more authority or better timing. -- Library Journal

No one else has examined the behavior of the American investor in the 1990s with more authority or better timing. -- Review

No one has explored the strange behavior of the American investor in the 1990's with more authority, or better timing, than Robert J. Shiller. -- The New York Times Book Review, Louis Uchitelle

Shiller has provided an accessible guide to the usually impenetrable literature on financial markets, especially the American stock market. -- Foreign Affairs

Shiller, no newcomer to the bubble theory of the stock market, briefed Greenspan two days before that 1996 speech. -- N. Gregory Mankiw, Fortune Magazine

Thus it is an event of some significance that Shiller has written a crystal-clear and tough-minded critique of the factors that have driven US stock markets to their current levels and called his book ''Irrational Exuberance.'' In it, he argues that Federal Reserve chairman Alan Greenspan had it exactly right when he uttered the famous phrase in a speech in 1996. The current high levels of the market don't represent a consensus judg ment by a cadre of sober experts, says Shiller. Instead, today's market is sky high because of wishful thinking by millions of people, egged on by professionals in and around Wall Street whose incentives all run in the direction of the more the merrier. -- David Warsh, Boston Globe

To appreciate just how high the S&P index is, read Professor Robert Shiller¹s excellent new book, Irrational Exuberance. -- Steve H. Hanke, Forbes --This text refers to an out of print or unavailable edition of this title.

“Robert Shiller has done more than any other economist of his generation to document the less rational aspects of financial markets.” — Paul Krugman

“A modern classic of ‘serious’ economics that demands to be read, and can be enjoyed, by the interested nonspecialist.” –The Economist

“A dose of realism that serious investors will ignore at their peril.” —The Wall Street Journal

“The point of Irrational Exuberance is not to help investors dump their houses before the current exuberance fades. It is to deepen our understanding of the events we are watching as one bubble gives birth to another.” —The International Herald Tribune

“Irrational Exuberance [is] a dazzling, richly textured, provocative book . . . offering a cogent statement of the bears’ view of events to come. Shiller is not merely a bear—he is a grizzly.” —BusinessWeek

Product Description:
As Robert Shiller’s new 2009 preface to his prescient classic on behavioral economics and market volatility asserts, the irrational exuberance of the stock and housing markets “has been ended by an economic crisis of a magnitude not seen since the Great Depression of the 1930s.” As we all, ordinary Americans and professional investors alike, crawl from the wreckage of our heedless bubble economy, the shrewd insights and sober warnings, and hard facts that Shiller marshals in this book are more invaluable than ever.

The original and bestselling 2000 edition of Irrational Exuberance evoked Alan Greenspan’s infamous 1996 use of that phrase to explain the alternately soaring and declining stock market. It predicted the collapse of the tech stock bubble through an analysis of the structural, cultural, and psychological factors behind levels of price growth not reflected in any other sector of the economy. In the second edition (2005), Shiller folded real estate into his analysis of market volatility, marshalling evidence that housing prices were dangerously inflated as well, a bubble that could soon burst, leading to a “string of bankruptcies” and a “worldwide recession.” That indeed came to pass, with consequences that the 2009 preface to this edition deals with.

Irrational Exuberance is more than ever a cogent, chilling, and astonishingly far-seeing analytical work that no one with any money in any market anywhere can afford not to read–and heed. Review
CNBC, day trading, the Motley Fool, Silicon Investor--not since the 1920s has there been such an intense fascination with the U.S. stock market. For an increasing number of Americans, logging on to Yahoo! Finance is a habit more precious than that morning cup of joe (as thousands of SBUX and YHOO shareholders know too well). Yet while the market continues to go higher, many of us can't get Alan Greenspan's famous line out of our heads. In Irrational Exuberance, Yale economics professor Robert J. Shiller examines this public fascination with stocks and sees a combination of factors that have driven stocks higher, including the rise of the Internet, 401(k) plans, increased coverage by the popular media of financial news, overly optimistic cheerleading by analysts and other pundits, the decline of inflation, and the rise of the mutual fund industry. He writes: "Perceived long-term risk is down.... Emotions and heightened attention to the market create a desire to get into the game. Such is irrational exuberance today in the United States."

By history's yardstick, Shiller believes this market is grossly overvalued, and the factors that have conspired to create and amplify this event--the baby-boom effect, the public infatuation with the Internet, and media interest--will most certainly abate. He fears that too many individuals and institutions have come to view stocks as their only investment vehicle, and that investors should consider looking beyond stocks as a way to diversify and hedge against the inevitable downturn. This is a serious and well-researched book that should read like a Stephen King novel to anyone who has staked his or her future on the market's continued success. --Harry C. Edwards

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