Irrational Exuberance, 1st ed.

Robert J. Shiller
Princeton University Press | March 2000 | ISBN: 0691050627

Winner of the Commonfund Prize, 2000 – This book is 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 takes as its specific starting point this ongoing boom, it places it in the context of stock market booms generally, and it also makes concrete suggestions regarding policy changes that should be initiated in response to this and other such booms. The book argues that the boom represents a speculative bubble, not grounded in sensible economic fundamentals. Part one of the book considers structural factors behind the boom. A list of twelve precipitating factors that appear to be its ultimate causes is given. Amplification mechanisms, naturally-occurring Ponzi processes, that enlarge the effects of these precipitating factors, are described. Part Two discusses cultural factors, the effects of the news media, and of “new era” economic thinking. Part Three discusses psychological factors, psychological anchors for the market and herd behavior. Part Four discusses attempts to rationalize exuberance: efficient markets theory and theories that investors are learning. Part Five presents policy options and actions that should be taken.

Paperback: Broadway Books | April 2001