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Irrational Exuberance

3.93 of 5 stars 3.93  ·  rating details  ·  2,909 ratings  ·  98 reviews
With a new Afterword on the current state of the stock market, the ongoing debate over the “new economy,” and the larger implications of “irrational exuberance.”

In this controversial, hard-hitting account of today’s explosive market, Robert J. Shiller, a leading expert on market volatility, evokes Alan Greenspan’s infamous 1996 reference, “irrational exuberance,” to explai
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Paperback, 352 pages
Published April 10th 2001 by Broadway Books (first published January 2000)
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Hadrian
In the 2009 e-book version, Shiller wrote a very modest introduction about the Great Recession. If he wanted to be a bit more succinct, he could just have written "I fucking told you so!"

A book in the long tradition started by Extraordinary Popular Delusions and The Madness of Crowds, with a less fancy prose style and more uses of the price/earnings ratio. It was rather astonishing how right Shiller was. Although maybe it was the publication of this book which led to the crash of the e-commerce
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Omar Halabieh
This book serves as an awakening call from "the present...whiff of extravagant expectation, if not irrational exuberance, in the air. People are optimistic about the stock market. There is a lack of sobriety about its downside and the consequences that would ensue as a result." The author advances that "we need to know if the price level of the stock market today, tomorrow, or any other day is a sensible reflection of economic reality, just as we need to know as individuals what we have in our b ...more
Ondrej Kokes
I very much enjoyed this book. It may seem a bit dry to a non-economist (and admittedly even to me, an economist), but it offers a brilliant overview on financial economics and gives you a good idea why Shiller was awarded the Nobel prize in 2013.

It also offers a nice perspective on the economic climate between recession as the second edition was published in 2005 (the third ed is out now, 2015) and so it contains new material compared to the very first edition that came out just before the .com
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Andreas
Irrational exuberance was a book I had been wanting to read for a very long time, so the question was: was the book worth the excitement I felt when the third edition was finally released? Well, yes and no. There are a few chapters that I thought were absolutely essential, namely the chapters in the first 100 pages of the book, including the introduction.

The second part, in which Shiller makes strange comparisons (I thought the epidemic-metaphor was not entirely appropriate), and discusses vari
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Geoff Noble
I really battled to get into this book. I didn't enjoy it at all. We all know that market bubbles exist and I really don't think Robert Shiller added much to the discussion (I will no doubt come under fire here from all the fans out there). This was summed up for me in the last chapter when he listed things that could go wrong in the future. He listed every conceivable scenario in the world. While I agree that you need to consider all possibilities and investing is about probabilities, it is in ...more
Wes Devauld
With Shiller sharing a lot of time in the news, I decided to read the book that made him famous.

The book is a great collection of information on how the assumption that investors are rational is false. He decimates the idea that individual investors make rational decisions through an exhaustive list of examples, backed by verifiable data.

The downside of the book, is in how it is written. The author makes use of references, and still decides to put the exact same information in the reference into
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Anil Swarup
The term "irrational exuberance" was first used by Alan Greenspan in 1996 when he perhaps perceived a bubble building up in the stock market. He did precious little to either elaborate this concept or take any step to prevent bubble from bursting as it eventually did at the turn of the century. In this seminal book, Shiller attempted to convince the reader about the existence of such irrational exuberance. He even explores the causes of such an exuberance. He delves into the history of past thre ...more
Kevin
I give this book 3.5 stars. In this book, Robert Shiller describes his take on why we see asset bubbles. When we see people start buying an asset (whether something like stocks or real estate) because they think that everyone else is doing it, and even though they have a hunch that what they are buying might be at least slightly overpriced, he attributes it to “Irrational Exuberance.” He talks a lot about the largest declines in the US stock market (1929, 1987, etc.) and the prevailing thinking ...more
Mike
Schiller's book is important for the weight that his name puts behind the case that investors need to understand the real risks involved in the assets that they buy and should eschew the comforting but simplistic conventional "wisdom" that claims that markets are always efficient, that "x always goes up" or "Y always outperforms a, b and c in the long run," and for the breadth of the research that he put into making the case. The book is also quite readable. I read it over the course of a few si ...more
Krishna Kumar
This is the second edition of the book, first written in 2000 and then updated in 2005. In the first book, Shiller warns that the stock markets were heavily overpriced and had no relation to the fundamentals of the economy. He was prescient as the resulting bust showed. In the 2005 book, he talks about the real estate market to demonstrate another bubble in action. Once again he was prophetic, as the housing market slipped dramatically in the following years.

Shiller explains why people, includin
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Philski
Not as good as I was hoping. There was plenty of evidence but I felt it was disjointedly presented and not brought together as a cogent argument of why we have (and in some ways continue to) experience irrational exuberances in the stock and real estate markets... it was more like throwing things on a wall hoping something sticks. That being said he's right, regardless of the reason why.
Nick S
Dense, informative overview on the nature of speculative bubbles in the markets when published in 2000 just the as the dot com boom went bust.

In Part I Shiller concentrates on naturally occurring Ponzi-scheme processes and twelve other precipitating structural "factors that have had an effect on the market that are not warranted by rational analysis of economic fundamentals":

The Arrival of the Internet at a Time of Solid Earnings Growth
Triumphalism and the Decline of Foreign Economic Rivals
Cult
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Shane
I'll focus on what I see as the book's key strengths: clarity and long term perspective. As an investor it's difficult to recognize a bubble when you're in it, and the book provides context to understand where we are "in the larger scheme of things." I read Graham's Intelligent Investor just prior to reading this, and the this adds robust layers to Graham's focus on varying investment conditions and expected returns over the longer term. I guess the central theme is that asset classes will becom ...more
Jason
9/4/07

I learned that we're all going to lose our savings in a massive crash and we're doomed.

Doomed.
Terry
I enjoyed the reasons for bubbles:

1. The feedback loop (price increases along will attract more people and get higher price increases)
2. Human attention is limited and can typically focus on limited things (news media will direct people to bubbles and etc.)
3. Psychological anchors - recent prices serve as anchors for people to judge whether the price is high or low.
4. Overall, the stock market is a natural ponzi process when in the bubble mode.
5. Herding effect and epidemics

The first edition was
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Oren
Robert Shiller is my favorite person to see interviewed on economics. He chooses his words carefully, always saying the economy is unpredictable while being heralded as a prophet. No matter how many times he stares into a camera and tells people he has never predicted the future of the economy, people still believe the myths. Like Kurt Cobain yelling songs about how much he hates his job and fans while growing more popular by the hour.

So I've been wanting to read this book for years. I've read s
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Gabriel Pinkus
While Howard Marks may find this book interesting, for the investor who cares about intrinsic values rather than why prices are the way they are, this book does not offer too much. Schiller had remarkable timing in predicting the dotcom bubble burst and the housing crisis. I'd imagine after how many finance professors there are in the world, a few ought to look so smart by chance.

Robert's perspective on value investors takes up about one paragraph of this 200 page book (the only investors who d
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John
What are we to make of the rise and fall of the stock market from the 1990s to 2000s, and the rise and collapse of home prices in the 2000s? This book asserts these changes are bubbles, created by a wide variety of factors, from greater non-expert participation in markets though new institutions such as 401(k), to continual distractions of news finding new kinds of records and continually bringing attention to current performance, to a general societal approval of speculation, to cultural storie ...more
Steve Bradshaw
A tremendously unbiased history of the US stock and real estate markets and a must read for anyone investing money (in any asset!)

Shiller delightfully lays out the pitfalls of investing in stocks at times of high PE ratios (a point that hits home given the book's first release date in late 1999) along with the wisdom of investing in times of economic upheaval and in value stocks that offer consistent earnings and dividends. A big take away for me was the impermanence of economic runs, both good
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Sabrine Faragallah
There is no topic Schiller does not address with respect to debunking pop-psychology and critiquing textbook market theory.

It had to be divine providence that one observation Schiller debunks, “There has been no 30 year period over which bonds have outperformed stocks,” came up in conversation among colleagues this past week. The discussion centered around the fact that the U.S. has a superior appreciation rate stocks on average while other countries do not. What I wanted to interject to say, b
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Anna
I had to rush through the last third of ‘Irrational Exuberance’ as it was due back at the library today. This also means I don’t have it in front of me, so must rely on my vague recollections to compose a review. Consider that a disclaimer.

It is important to note that I read the second edition of the book, published in 2005. The first edition, published in 2000, warned of a potential bubble in stock market prices. Lo, there was. This edition warns of a bubble in real estate prices. Two for two!
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Chris Leuchtenburg
I had been watching Shiller course on Finance on Open Yale Courses. When he won the Nobel, I decided to read one of his books. I doubt that this book written for laymen contributed much to his Nobel win.

It is such a pleasure to observe a great mind at work. The early chapters present a measured, well-considered explanation of the sources and nature of market bubbles. Much of his most interesting research, such as the impact of anchors, comes from Kahneman, the author of the much more interesting
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Todd N
Read this while fighting off a cold over a two day period.

The first edition of this book was published in 2000 and concerned the stock boom of this period. The second edition (which is the one I read) was published in 2005 and contains new material concerning the housing price boom.

After the crazy past few weeks with the economy, this seemed like the perfect book to read to get some insights into what is going on. Indeed after a few enlightening chapters covering stock and housing prices, the ma
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Teddee
A good common sense primer on the flaws in the efficient markets hypothesis, which is the standard model presented in most finance textbooks. He acknowledges the difficulty of modeling self-fulfilling expectations and bubbles but uses a lot of surveys to demonstrate his case.

Shiller discusses various structural, cultural, and psychological factors that have given rise to the irrational exuberance in the market relative to historic norms.

It is quite suggestive of this book's influence that months
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Hong
SUMMARY
The irrational behavior exhibited by US stock market during the last year of 20th century resembled market situation in 1901, 1929 and 1966. Such "irrational exuberance" was driven by the "new-era" belief, news media and human nature.

Finally, contrary to the mainstream idea (i.e., equity risk premium), there is no solid reason to believe stocks will outperform bonds in the long run[I still find it hard to swallow]. Options for improving market's rationality available to government and
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Rohan
Always wanted to get to this book but something kept telling me that this might be a little outdated since the we are good 15 years past the first publication date. But, I am glad I came around and read this one. I got a good dose of history of stock market crashes since the late 19'th century and also a great insight into thinking of Mr.Shiller in predicting the housing crisis of 2007-08 and also the 2000's tech bubble burst. More importantly, the simplistic way he explains the irrational behav ...more
Harry Jr.
Robert has been the up-and-coming new mainstream economist and deservedly so as he came up with a new model for housing appreciation in line with inflation, and along with me, predicted the housing bubble burst in 2005 and 2006. He also has a better model for stock valuations that is flashing red lights while the traditional ones are not.
Samp
Excellent market observations that often go unnoticed and Shiller raises questions that mostly go unanswered by the investment media. Is there really hope for widespread macro markets? I've seen a number of macro-diversified investment funds but having so few available to the investing public really hampers their growth and exposure. I loved this book. It's an excellent read for anyone who wants deeper insights into the assumptions so many take for granted.
Bob
Very interesting book on the markets, investor psychology, and our misperceptions of both, as well as a survey of history and markets around the world. It was prescient in 2000 and is very applicable now. After the internet bubble burst in 2000, the market eroded further following the 9/11 attack. Since then it powered up for the a huge bull market for next five years, this time fueled by the housing market and low interest rates. If things look too good to be true, they probably are, and we've ...more
Jennifer
This had some good points, though at times I struggled with Shiller's writing style. I think he did a good job of deconstructing the myth of efficient markets--meaning, markets that respond perfectly to the forces affecting prices. (It's an idea that can be useful for theorizing academics, but any close look at the real world shows just how laughable it is as a version of reality.)
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Robert James "Bob" Shiller (born Detroit, Michigan,March 29, 1946) is an American economist, academic, and best-selling author. He currently serves as the Arthur M. Okun Professor of Economics at Yale University and is a Fellow at the Yale International Center for Finance, Yale School of Management. Shiller has been a research associate of the National Bureau of Economic Research (NBER) since 1980 ...more
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“Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increases and bringing in a larger and larger class of investors, who, despite doubts about the real value of an investment, are drawn to it partly through envy of others’ successes and partly through a gambler's excitement.” 0 likes
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