In this bold and potentially urgent volume, Robert Shiller analyzes the structural and psychological factors behind the tripling in value of the Dow Jones Industrial Average between 1994 and 1999 - a level of growth not reflected in any other sector of the economy.
Shiller stresses circumstances that alter investors' perceptions of the market, including:
- The entry of the internet into American homes
- The misimpression that the ageing of the baby-boom generation builds long-term protection into the market
- Herd behaviour
- Day trading
He also examines cultural factors, including sports-style media coverage of the Dow's ups and downs and 'new era' thinking about the economy. He considers and challenges efforts to rationalize exuberance that are based on either efficient-markets theory, narrowly construed or claim that investors have only recently learned the true value of the stock market.
"Fraud, no. Hype, yes: the US stock market, in an ascending orbit for the past two years is heading for a black hole. That is the conclusion of Irrational Exuberance, a dazzling, richly textured, provocative, and possibly wrong-headed new book by Yale University economist Robert Shiller. It is by far the most important book about the stock market since Jeremy Siegel's 1994 Stocks for the Long Run, offering a cogent statement of the bear's view of events to come."
- Business Week
"Irrational Exuberance should be required reading for anyone interested in Wall Street or financially exposed to it."
- The Economist
"Feeling queasy about the stock market? Worried that you're depending a bit much on compounding stock returns to pay for retirement of college tuition? If so, you might throw up after reading a new book by Robert Shiller."
- USA Today
"Irrational Exuberance is not just a prophecy of doom. Encompassing history, sociology and biology, as well as psychology and economics, it is a serious attempt to explain how speculative bubbles come about and how they sustain themselves."
- The New Yorker
1. The stock market level in historical perspective
Part One: Structural Factors
2. Precipitating factors: the internet, the baby boom, and other events
3. Amplification mechanisms: naturally occurring Ponzi processes
Part Two: Cultural Factors
4. The news media
5. New era economic thinking
6. New eras and bubbles around the world
Part Three: Psychological Factors
7. Psychological anchors for the market
8. Herd behaviour and epidemics
Part Four: Attempts to Rationalize Exuberance
9. Efficient markets, random walks and bubbles
10. Investor learning - and unlearning
Part Five: A Call to Action
11. Speculative volatility in a free society
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