Book: Irrational Exuberance

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Irrational Exuberance

Robert J. Shiller, Sterling Professor of Economics

(Princeton University Press)

In this revised, updated, and expanded edition of his bestseller, Robert Shiller, who warned of both the tech and housing bubbles, now cautions that signs of irrational exuberance among investors have only increased since the 2008-9 financial crisis. With high stock and bond prices in the United States, and rising housing prices in many countries, the post-subprime boom, the author contends, may turn out to be another illustration of his argument that psychologically driven volatility is an inherent characteristic of all asset markets.

“Irrational Exuberance” also explains the forces that move all markets up and down. It shows how investor euphoria can drive asset prices up to unsustainable heights, and how, at other times, investor discouragement can push prices down to very low levels.

Previous editions covered the stock and housing markets — and predicted their crashes. This new edition expands its coverage to include the bond market, so that the book now addresses all of the major investment markets. This edition also includes updated data throughout, as well as Shiller’s 2013 Nobel Prize lecture, which puts the book in broader context.

In addition to diagnosing the causes of asset bubbles, “Irrational Exuberance” recommends urgent policy changes to lessen their likelihood and severity — and suggests ways that individuals can decrease their risk before the next bubble bursts.

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