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Irrational Exuberance

3.98  ·  Rating details ·  6,918 ratings  ·  266 reviews
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 ...more
Paperback, Second, 304 pages
Published February 22nd 2005 by Currency (first published March 15th 2000)
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 ·  6,918 ratings  ·  266 reviews

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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
Robert P. Hoffman
May 07, 2016 rated it it was amazing
This is a book that needs to be reread in order for the points to absorbed.

Shiller starts out with three chapters that present statistics showing that stocks and real estate are not investments that people can count on to earn a good long-run return. He shows that if people got into the market at the wrong time they could end up having to wait for a long time before the value of stocks returned to the price that people paid for the stocks. He shows similar statistics for real estate.

In the chapt
Omar Halabieh
Mar 23, 2013 rated it really liked it
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
Jan 07, 2015 rated it really liked it
Two subjects I love: finance and psychology. Which is called behavioral finance, but whatever.

All I can say is, I read the wrong edition. Ugh. The third edition is Shiller's grand middle finger to the markets after the crash of 08/09 and subsequent recession. I should have read that instead, but this was a solid, still relevant (and eerily prophetic) blast from the past.
Sep 16, 2017 rated it really liked it
I read this because I got to have dinner with Shiller recently and I wanted a reminder of his theories. I wonder if it's outdated or it's still true that markets are over priced. I think he's absolutely right that they're not efficient, but is it time to sell? He said he didn't know. ...more
Jan 31, 2021 rated it really liked it  ·  review of another edition
Considering the current Gamestop stock frenzy, this seems like a timely read.
Aristidis Marousas
Aug 30, 2015 rated it liked it
A little dry for me. I actually ended up skimming through most of it because you could get the main point of each chapter in each chapters' final paragraph.

I can see why this is a popular book, as Shiller discusses a lot of history about the stock market. However, I do not feel as though I've really learned any new aspects about the markets, besides some small details of history discussed.

If you're reading this book then you probably already know that there's more to the stock market than luck,
Jun 17, 2016 rated it really liked it
This book is kind of dangerous. Shiller is wrong on the big picture but super convincing. Problem is he argues through analogies not basic principles. He puts up this analogy where
Brian Yahn
Mar 09, 2020 rated it liked it
What a time to read a book about market panics & pandemics!

It's interesting that when the market goes up, people assume it makes sense, because they're making money and they like it. But when the market goes down, they think it's an over-reaction, because they liked the higher number better -- because that was their imagined net worth.

In reality, if stocks were valued in any true sense, prices almost never make any sense. When the market goes up, it's not because of fundamentals. And when it goe
Yousif Al Zeera
Mar 20, 2019 rated it really liked it  ·  review of another edition
Shelves: yz, nonfiction
Stock market, bond market and real estate market. When, where and why in a bubble? What is psychology's role into the markets? Is it really efficient markets? In-depth coverage with historical case studies and comparison studies of trends of different markets shed loads of light into the subject. Suitable for business graduates (banking, finance, accounting, etc.). The appendix (The author's Noble Prize Speech) is a bit advanced and can be skipped in case you can't withstand too much mathematica ...more
Aug 14, 2014 rated it really liked it
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
Anil Swarup
May 06, 2014 rated it really liked it
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
Ondrej Kokes
Mar 17, 2015 rated it really liked it
Shelves: econ
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
Mike Thicke
Jan 11, 2017 rated it really liked it  ·  review of another edition
Shelves: economics
Shiller is rare among economists both for his sense of history and his openness to engaging with other disciplines (qualities that he shares with Thomas Piketty). In the first edition of this book, published in 2000, Shiller argued that the stock market was in the midst of a bubble. What is now known as the Dot-Com Bubble ended just as it was published. In the second edition, published in 2005, Shiller argued that the housing market was overvalued. In this edition, he argues that the stock marke ...more
Sep 11, 2015 rated it it was amazing
One of the best books on investments ever written. I wish I had read this when I was younger, rather than reading books like 'the Dow 20,000' etc. Painful lessons learnt. ...more
Sep 15, 2017 rated it liked it
Shelves: nonfiction
This was pretty interesting and well written. The 3rd edition, updated in 2014 includes material on the 2008 mortgage driven crisis and even current "state of the economy" in 2014.
Shiller speaks very lightly: he doesn't say "The economy is going to go bust." He says: his CAPE ratio for the markets (a 10-year average PE) has only been higher at 2 times in history: 1929 and 2000. And that was 2014. That's scary but you just can't predict the future. We could have a booming economy and stock market
James Ford
Mar 21, 2020 rated it it was ok
Unfortunately most of the ideas in this book are now fairly basic, although I admit that at the time it was written it was probably more enlightening (this was written pre-internet trading, pre-online financials, pre-online news and blog sites, etc.). The main point is that markets are not always rational for a number of (fairly obvious) reasons. A few interesting takeaways for me:

1. "New era economic thinking": this was the one very good chapter in my opinion. This chapter discusses the fact th
Jai Gupta
May 30, 2017 rated it liked it
The book gets its name and theme from the buzzwords used in Alan Greenspan's speech as the Chairman of the US Federal Reserve Board in 1996. It focuses on how the mood of 'irrational exuberance' is pushing up the stock prices and stretching the valuations and how the levels of the US Stock markets are way above rational. With thorough research and groundbreaking findings, Prof. Shiller convinces us about his theory of the unprecedented bubble. P/E ratios were dramatically out of line with histor ...more
Nov 28, 2017 rated it really liked it
This review has been hidden because it contains spoilers. To view it, click here.
Samridhi Khurana
May 18, 2018 rated it it was ok
It is a literature on the bubbles existing in the world of financial markets. Shiller takes us through the various bubbles that sustained themselves due to herd mentality and feedback mechanisms in the markets. The underlying message of the book is to question the efficient market hypothesis and to caution the investors against the soaring markets due to amplification effects. Apart from this key message, I found most of the content to be repetitive and redundant.
This book did not tell me a lot. Humans are irrational creatures. Our financial market shares in this irrationality, despite what experts want to tell us. Thus, we should try to hedge our bets as much as possible.
Aug 29, 2020 rated it liked it
A discussion of speculative bubbles and behavioral finance. I found the parallels drawn between biological/psychological concepts and the markets to be the most interesting especially given the current pandemic. However, there were also more than a few parts that were dry and didn't offer much new. ...more
Morten Hovland
Nov 24, 2020 rated it liked it
This review has been hidden because it contains spoilers. To view it, click here.
Chris Coccaro
Jun 12, 2019 rated it it was amazing
Predicting two major recessions, Shilling lays out his thoughts on the stock market - feeling very much like a systematic dismantle of the seemingly flimsy market that many in the world look up to as a marker for American status, wealth, and the direction of the country (and in some cases, the world). An excellent piece on financial psychology that predicted not one, but two different crashes.

I found myself re-reading multiple passages as while the book is dense, and sentences are long and somet
Steven Siswandhi
Aug 03, 2020 rated it really liked it
The main thesis is that often stock/bond/real estate prices go up for petty reasons such as opinion or news item which has little relevance with how the fundamentals are doing. Shiller spends a lot of time exploring this theme by detailing crowd psychology. I like the final chapter where it explains that the solution is not just to impose rules, but to give people option to invest in products that will enable them to hedge their risk. Overall a good overview on how market prices behave.
Vincent Li
Jul 24, 2015 rated it really liked it  ·  review of another edition
An excellent inbetween book. Not too academic and dry but also not too simplistic. The most complete treatment of bubbles I've read.

Shiller is a great empiricist, and tests out efficient markets hypothesis through various econometric tests and survey data. Shiller actually asks investors through extensive survey data to see what their motivations and logic is, a pretty simple but radical move from assuming them to be rationally calculating agents. Through this data Shiller shows how irrational,
Dec 01, 2015 rated it it was amazing  ·  review of another edition
The third edition of Irrational Exuberance by Shiller analyses and explains the influence of structural, cultural, and psychological factors in the creation of bubbles. The book reads as the mix of an academic economic research paper and a popular non-fiction book, and contains an abundance of useful references to prior research.

Shiller does not shy away from expressing his own view throughout the book. This is particularly useful for the reader without an advanced economic background: the figu
Henrik Haapala
Jan 02, 2017 rated it it was amazing
"Thus the simple wisdom—that when one is not getting
much in dividends relative to the price one pays for stocks it is not
a good time to buy stocks—turns out to have been right historically."

"The second instance of a high price-earnings ratio occurred in
September 1929, the high point of the market in the 1920s and the
second-highest ratio of all time. After the spectacular bull market
of the 1920s, the ratio attained a value of 32.6. As we all know, the
market tumbled from this high, with a real dro
Mark Lawry
Perhaps I’m giving him an extra star just for winning the Nobel Prize. Shiller is clearly a brilliant man and this book is well researched. However, I’m not sure we learn anything. We’ve known of booms and busts for a long time. This book is a discussion about the efficient market theory and why markets really aren’t efficient at all. I still hold to the theory myself, knowing that it is clearly wrong at times for all the reasons found in this book.

I did get hung up on a few points. He mocks t
Dec 20, 2013 rated it liked it
Shelves: economics-etc
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 var
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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 198 ...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.” 7 likes
“Just what is a speculative bubble? The Oxford English Dictionary defines a bubble as “anything fragile, unsubstantial, empty, or worthless; a deceptive show. From 17th c. onwards often applied to delusive commercial or financial schemes.” The problem is that words like show and scheme suggest a deliberate creation, rather than a widespread social phenomenon that is not directed by any central impresario.” 4 likes
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