Irrational Exuberance: (Second Edition) [Hardcover]

CNBC, day trading, The Motley Fool, Silicon Investor. Not since the 1920s has there been such an intense fascination with the US stock market. For an increasing number of people, logging onto Yahoo finance is a habit more precious than that morning cup of coffee (as thousands of SBUX and YHOO shareholders know too well). Yet while the market continues to go higher, most of us can't get Alan Greenspan's famous line out of our heads. In Irrational Exuberance, Yale economics professor Robert Shiller examines this public fascination with stocks and sees a combination of factors that have driven stocks higher, including the rise of the Internet, increased coverage by the popular media of financial news, overly optimistic cheerleading by analysts and other pundits, the decline of inflation, and the rise of the mutual fund industry. He writes, "Perceived long-term risk is down ... Emotions and heightened attention to the market create a desire to get into the game. Such is irrational exuberance today in the United States."

By history's yardstick, Shiller believes this market is grossly overvalued and the factors that have conspired to create and amplify this unique millennium event--the baby boom effect, the public infatuation with the Internet, news media interest--will most certainly abate. He fears that too many individuals and institutions have come to view stocks as their only investment vehicle, and that investors should consider looking beyond stocks as a way to diversify and hedge against the inevitable downturn. This is a serious and well-researched book that should read like a Stephen King novel to anyone who has staked their future well-being to the market's continued success. --Harry C. Edwards, Amazon.com --This text refers to an out of print or unavailable edition of this title.

It may be one of the most important books on higher education published in the last twenty years. It is certainly one of the most interesting. --This text refers to an out of print or unavailable edition of this title.

A modern classic of "serious" economics that demands to be read, and can be enjoyed, by the interested non specialist. --This text refers to an out of print or unavailable edition of this title.

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: "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: "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: "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

From review of Princeton's previous edition: "Shiller has provided an accessible guide to the usually impenetrable literature on financial markets, especially the American stock market. -- "Foreign Affairs

From review of Princeton's previous edition: "Shiller contends that investor psychology is so given to herd behavior that it's almost impossible to manipulate or even influence. The market can 'go through significant mispricing lasting years or even decades.' -- Robert J. Samuelson, Washington Post

From review of Princeton's previous edition: "Irrational Exuberance should be compulsory reading for anybody interested in Wall Street or financially exposed to it; at the moment, that would be roughly everybody in the United States. -- "Economist

From review of Princeton's previous edition: "[An] excellent new book. . . . If you want to preserve capital, unload most of your stocks and invest in government bonds. -- Steve H. Hanke, Forbes

From review of Princeton's previous edition: "Likely to be the year's most-talked-about finance book. . . . You can agree or disagree with it. But you owe it to yourself to read it if you are investing in equities or contemplating doing so. -- Fred Barbash, International Herald Tribune

From review of Princeton's previous edition: "Irrational Exuberance is likely to cause a stir. . . . Shiller illustrates how the current market is like a naturally occurring Ponzi scheme in which investors become promoters for the game after receiving initial payments with money taken from subsequent investors. -- David Henry, USA Today

From review of Princeton's previous edition: "Irrational Exuberance is not billed as a personal finance book. But it is. You can agree or disagree with it. But you owe it to yourself to read it if you're investing, or contemplating investing, in inequities. -- "The Washington Post

From review of Princeton's previous edition: "A must-read . . . refreshing, well-reasoned . . . and very readable. -- Michael P. Niemira, Barron's

From review of Princeton's previous edition: "So why have share prices soared so high in the past five years, taking market valuations past all historical records? Professor Shiller's answer, as the title indicates, is not encouraging. His message is: diversify now as much as you can, and batten down the hatches. -- Diane Coyle, Independent

From review of Princeton's previous edition: "Shiller has written a crystal-clear and tough-minded critique. . . . -- David Warsh, Boston Globe

The point of Irrational Exuberance is not to help investors dump their houses before the current exuberance fades. It is to deepen our understanding of the events we are watching as one bubble gives birth to another and to encourage readers to think about economic behavior and economic policies that can cushion the nasty side of volatility. -- Sharon Reier, The International Herald Tribune

The first edition of this book was widely read because of its timing. This one, too, seems perfectly timed, coming when we're starting to fear we've been fooling ourselves. Again. . . . There's a world of important information for everyone. -- Lyn Miller, USA Today

The second edition's new component . . . is Shiller's exploration of how market psychology has responded to the ensuing five years of retrenchment. One chilling conclusion he reaches from his knowledge of past market performance is that the 2005 market may still be correcting and that a return to 2000 levels may be a decade away. He further warns that many investors are still too heavily invested in equities and that proposals to invest Social Security funds in the stock market would subject the retirement system to unacceptable risk. Shiller expands his focus to include the booming real estate market where he sees another speculative bubble building. -- "Library Journal

There's plenty of new material in this edition. . . . Chief among the new additions is Shiller's deeper focus on recent excesses in the stock market and his skepticism about investing in real estate. . . . . Shiller's ideas have so many devoted followers that I wouldn't be surprised to see many more editions. -- Angele McQuade, BetterInvesting

Yale University Professor Robert Shiller pretty much called the stock market drop when this book was first published in 2000. In this fact-packed book, Shiller describes the psychological origins of volatility, among other things. And in the newest edition, Shiller compares the recent housing boom to the stock market bubble of the 1990s. -- "Registered Rep.

To appreciate just how high the S&P index is, read Professor Robert Shiller¹s excellent new book, Irrational Exuberance. --This text refers to an out of print or unavailable edition of this title.

Shiller has provided an accessible guide to the usually impenetrable literature on financial markets, especially the American stock market. --This text refers to an out of print or unavailable edition of this title.

No one else has examined the behavior of the American investor in the 1990s with more authority or better timing. --This text refers to an out of print or unavailable edition of this title.

To appreciate just how high the S&P index is, read Professor Robert Shiller¹s excellent new book, Irrational Exuberance. --This text refers to an out of print or unavailable edition of this title.

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

Informative and well-argued. . . . A calm and reasonable antidote to today's euphoria. --This text refers to an out of print or unavailable edition of this title.

"This is an excellent book by a distinguished scholar. It raises an issue of the utmost importance for the U.S. economy and presents a persuasive case that the U.S. stock market may be significantly overvalued. It is well written for a popular as well as a professional readership." (Michael Brennan, Anderson School of Management, University of California, Los Angeles) --This text refers to an out of print or unavailable edition of this title.

Robert J. Shiller is the Stanley B. Resor Professor of Economics at Yale University. He is author of "The New Financial Order: Risk in the 21st Century" (Princeton) and "Market Volatility and Macro Markets", which won the 1996 Paul A. Samuelson Award.