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 | Irrational Exuberance: |
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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 From review of Princeton's previous edition: "Robert J. Shiller . . . has done more than any other economist of his generation to document the less rational aspects of financial markets."--Paul Krugman, New York Times From review of Princeton's previous edition: "Irrational Exuberance is not just a prophecy of doom. . . . [I]t is a serious attempt to explain how speculative bubbles come about and how they sustain themselves."--John Cassidy, New Yorker From review of Princeton's previous edition: "Informative and well-argued . . . A calm and reasonable antidote to today's euphoria."--Jeff Madrick, New York Review of Books From review of Princeton's previous edition: "What set off this speculation and what feeds it? Shiller ranges widely his explanations, laying them out in the first 168 pages in easy-to-read, sometimes passionate prose. . . . [T]hose first 168 pages are must reading for anyone with savings invested in stocks."--Louis Uchitelle, New York Times Book Review From review of Princeton's previous edition: "Mr. Shiller's book offers a dose of realism. . . . [I]t presents a message investors would be wise to head: Make sure your portfolio is adequately diversified. Save more and don't count on double-digit gains of the past decades continuing to bail you out during retirement."--Burton G. Malkiel, Wall Street Journal From review of Princeton's previous edition: "Although its message may be unwelcome to many, this important book should be read by anyone interested in economics or the stock markets."--Rene M. Stulz, Science From review of Princeton's previous edition: "Dazzling, richly textured, provocative . . By far the most important book about the stock market since Jeremy J. Siegel's Stocks for the Long Run."--William Wolman, Business Week This book has been translated into:
Other Princeton books authored or coauthored by Robert J. Shiller:
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