In this revised, updated, and expanded edition of his New York Times bestseller, Nobel Prize–winning economist Robert Shiller, who warned of both the tech and housing bubbles, cautions that signs of irrational exuberance among investors have only increased since the –9. When Alan Greenspan, then Chair of the Federal Reserve Board, used the term irrational exuberance to describe the behavior of stock market investors, the. Irrational. Exuberance. Robert J. Shiller. Princeton University Press. Princeton The third instance of a high price-earnings ratio occurred in Jan- uary
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irrational exuberance to describe the behavior of stock market investors, the not coin the phrase irrational exuberance, but he did cause it to be attached to a. Read Irrational Exuberance 3rd edition PDF - by Robert J. Shiller Princeton University Press | In this revised, updated, and expanded edition of. Shiller, Robert J. Irrational exuberance. 3rd ed., rev. and expanded. Princeton,. p bibl index afp ISBN , $ Borrowing a phrase.
However, if some of the arguments made in Chapter Ten Herd Behavior and Epidemics are correct then we would expect the exact opposite. Be able to explain why the different theories have different predictions and be able to explain what results Shiller finds. Sep 15, Hadrian rated it really liked it Shelves: In the e-book version, Shiller wrote a very modest introduction about the Great Recession.
If he wanted to be a bit more succinct, he could just have written "I fucking told you so! It was rather astonishing how right Shiller was. Although maybe it was the publication of this book which led to the crash of the e-commerce In the e-book version, Shiller wrote a very modest introduction about the Great Recession. Although maybe it was the publication of this book which led to the crash of the e-commerce bubble of , which might have proven him right anyway.
View 1 comment. Mar 23, Omar Halabieh rated it really liked it. This book serves as an awakening call from "the present People are optimistic about the stock market. There is a lack of sobriety about its downside and the consequences that would ensue as a result. It ends with a section on implication of these findings on the various members of society whether individuals, institutions or government.
Below are key excerpts that I found particularly insightful: As prices continue to rise, the level of exuberance is enhanced by the price rise itself The changes in thought patterns infect the entire culture and they operate not only directly from past price increases but also from auxiliary cultural changes that the past price increases helped generate. The news media are fundamental propagators of speculative price movements through their efforts to make news interesting to their audience.
At such time, a public speaker may still think that it would be good business to extol a vision of a brilliant future for our nation's economy, but it is simply not credible to do so. One could, at such times, present a case that the economy must recover, as it always has, and that the stock market is underpriced and should go up, but public speakers who make such a case cannot achieve the command of public attention they do after a major stock run-up and economic boom. There are times when an audience is receptive to optimistic statements and times when it is not.
Ultimately, however, the conclusions we draw from such evidence depend on our view of human nature and the extent of human abilities to produce consistent and independent judgements.
We can make decisions then that would have been impossible before the news was known. It is partly for this reason that the breaking off of a psychological anchor can be so unpredictable: Psychological anchors for the market hook themselves on the strangest things along the muddy bottom of our consciousness.
Speculative markets perform critical resource-allocation functions, and any interference with markets to tame bubbles interferes with these functions Most of the thrust of our national policies to deal with speculative bubbles should take the form of facilitating more free trade, as well as greater opportunities for people to take positions in more freer markets.
A good outcome can be achieved by designing better forms of social insurance and creating better financial institutions to allow the real risks to be managed more effectively. The most important thing to keep in mind as we are experiencing a speculative bubble in the stock market today is that we should not let it distract us from such important tasks.
Jan 07, Vonetta rated it really liked it. Two subjects I love: Which is called behavioral finance, but whatever. All I can say is, I read the wrong edition. I should have read that instead, but this was a solid, still relevant and eerily prophetic blast from the past. Sep 16, Mehrsa rated it really liked it. I read this because I got to have dinner with Shiller recently and I wanted a reminder of his theories. I wonder if it's outdated or it's still true that markets are over priced.
I think he's absolutely right that they're not efficient, but is it time to sell? He said he didn't know. Stock market, bond market and real estate market. When, where and why in a bubble? What is psychology's role into the markets? Is it really efficient markets?
In-depth coverage with historical case studies and comparison studies of trends of different markets shed loads of light into the subject. Suitable for business graduates banking, finance, accounting, etc. The appendix The author's Noble Prize Speech is a bit advanced and can be skipped in case you can't withstand too much mathematica Stock market, bond market and real estate market.
The appendix The author's Noble Prize Speech is a bit advanced and can be skipped in case you can't withstand too much mathematical talk. Aug 14, Oren rated it really liked it. Robert Shiller is my favorite person to see interviewed on economics.
He chooses his words carefully, always saying the economy is unpredictable while being heralded as a prophet. No matter how many times he stares into a camera and tells people he has never predicted the future of the economy, people still believe the myths. Like Kurt Cobain yelling songs about how much he hates his job and fans while growing more popular by the hour. So I've been wanting to read this book for years. I've read s Robert Shiller is my favorite person to see interviewed on economics.
I've read some of Shiller's academic papers and enjoyed them.
Shiller really digs into the complete picture of economics, delving, or forging even, into the area of psychology in order to fill-out the frame. In this book, Shiller and his research associates have put huge amounts of time into looking at past significant changes in the stock and housing markets in order to try and understand them.
This time included data base and internet searches for news stories including certain phrases to try and understand the prevalence of certain ideas. One of these ideas is economic bubbles. Bubbles are those events which can't reasonably be explained by fundamental ideas of business or economics. They are agreed to be strictly events of sociology or some outside influence that suddenly causes business or market changes by extraordinary force.
One of the issues of studying economics is that much of it is learned from history. Few people understand this fact. Shiller is clearly in a camp of people who don't believe that but is also, as a scholar, open to what can be learned from such calculations and models.
Several bubbles are identified and attempts are made to understand or explain them in hindsight.
The efforts to employ psychology come up short for me. They get very close but don't offer satisfying results. As an example, there is a section which talks about epidemic diseases and how they spread. These models are then applied, with agreed limitations, to the spread of information. This is done to try and explain how an idea like, 'Houses never lose money" spreads through society and causes changes in prices through downloading activity.
These ideas all made sense but I never quite got the exact connection. The psychology was too light. Perhaps it's there, if I were to scour the notes section and references.
I suspect Shiller has been quite thorough but the words themselves left me wondering, "Exactly what is the connection with psychology? Perhaps another reading is in order.
I wonder what his wife, a psychologist or social scientist of some kind, thinks about his efforts to combine psychology and economics. It comes off a bit "psychology light. This theory essentially says that the market, in the long term, will always obey supply and demand laws. All of the people transacting to make up the economy serve to even-out lawbreaking events and therefore, the economy lends itself to predictability and, even, calculation.
Shiller even admits that perhaps the reason some of his ideas show problems with the idea of an efficient market is that there hasn't been enough time to adequately, statistically signficantly, measure. This book covers huge ground. Toward the end there is even some scathing commentary on how the United States military preference might play into future states of economy.
The killing of so many people will no doubt find some retribution. While I've leaned on Shiller's ideas and information heavily in a decision not to spend a large percentage of my net worth on a house, I came away from this book thinking intensely about how much I've leaned on the stock market.
Shiller's idea of wise investing is clearly different form that espoused by the k support brought-in by the financial institutions holding the funds.
I will look closely again at how my money is invested. Good luck to those trying to predict the future state of the economy. Experts agree that is not the point. One can only try to learn from the past by taking reasonable actions based on fundamentals and the hypothesis that the past presents tendencies which will be repeated.
Luck might swing one way or the other so best to learn as much as you can and apply the ideas so as not to be unlucky. Mar 17, Ondrej Kokes rated it really liked it Shelves: I very much enjoyed this book. It may seem a bit dry to a non-economist and admittedly even to me, an economist , but it offers a brilliant overview on financial economics and gives you a good idea why Shiller was awarded the Nobel prize in It also offers a nice perspective on the economic climate between recession as the second edition was published in the third ed is out now, and so it contains new material compared to the very first edition that came out just before the.
The newest edition should contain the Great Recession in full. What I found most useful was Shiller's precise and conservative approach to researching things. He would offer a lengthy analysis of the news around crises, detail surveys he sent out at the time, focus on the impact of phrasing of these surveys etc. Even when he came to the efficient market hypothesis, his nemesis if you will, he would be very careful to dissect all the arguments of Fama et al. At one point he wrote somethign to the essence of "there is basically no evidence supporting this claim, but let's deal with it anyway.
Shiller is rare among economists both for his sense of history and his openness to engaging with other disciplines qualities that he shares with Thomas Piketty. In the first edition of this book, published in , Shiller argued that the stock market was in the midst of a bubble. What is now known as the Dot-Com Bubble ended just as it was published. In the second edition, published in , Shiller argued that the housing market was overvalued. In this edition, he argues that the stock marke Shiller is rare among economists both for his sense of history and his openness to engaging with other disciplines qualities that he shares with Thomas Piketty.
In this edition, he argues that the stock market is again overvalued. We'll see how that latest prediction turns out, but regardless in this book Shiller presents a compelling argument against the efficiency of markets and for applying psychology, sociology, and history to our understanding of market dynamics. Although I was already generally familiar with Shiller's work, I still found this book a valuable and nuanced presentation of his theory of market dynamics as well as a great source for understanding the various ups and downs of markets in the 20th century.
Aug 30, Aristidis Marousas rated it liked it. A little dry for me. I actually ended up skimming through most of it because you could get the main point of each chapter in each chapters' final paragraph. I can see why this is a popular book, as Shiller discusses a lot of history about the stock market. However, I do not feel as though I've really learned any new aspects about the markets, besides some small details of history discussed.
If you're reading this book then you probably already know that there's more to the stock market than luck, A little dry for me. If you're reading this book then you probably already know that there's more to the stock market than luck, or the latest headline.
If you're expecting Shiller to solve the stock market problem for you, move on. Sep 11, Daniel rated it it was amazing. One of the best books on investments ever written. I wish I had read this when I was younger, rather than reading books like 'the Dow 20,' etc. Painful lessons learnt. Sep 15, Andy rated it liked it Shelves: This was pretty interesting and well written. The 3rd edition, updated in includes material on the mortgage driven crisis and even current "state of the economy" in Shiller speaks very lightly: And that was That's scary but you just can't predict the future.
We could have a booming economy and stock market This was pretty interesting and well written. We could have a booming economy and stock market for another 10 years, followed not by a bubble bursting, but by a slow deflation of sorts where average returns on stocks are low or negative.
But we could also have a bubble burst. Interesting notes include that bubbles like often are based on stories or reasoning that "The economy has changed! There is some good discussion of "efficient markets" and what makes markets act inefficient. The book talks about bubbles in real estate, bonds and stocks.
Interestingly Shiller claims that real estate does not outperform stocks in the long run, and long term real estate prices in most places that aren't running out of space are driven mostly by construction costs, which have been going down over the years.
And also interestingly, there is a claim that stocks do not outperform bonds over the long term, which is contrary to many things I've read, although I didn't see much data to support that claim. I admit I was skimming when I read this section. Interesting book, but as you might guess there is little hard science on how to predict the exact time within years of a bubble, and not much to do about it stay in stocks, but choose stocks with low CAPE.
Still I'm worried enough to be thinking about how to prepare. May 30, Jai Gupta rated it liked it. It focuses on how the mood of 'irrational exuberance' is pushing up the stock prices and stretching the valuations and how the levels of the US Stock markets are way above rational.
With thorough research and groundbreaking findings, Prof. Shiller convinces us about his theory of the unprecedented bubble. Though I found the book over-referenced and slightly repetitive, it nevertheless makes an interesting read.
Shiller is an economist and not an investor, so, it is natural for him to inextricably link stock markets and economy. However, they are two separate entities and mostly do not explain each other.
I don't deny that markets are not a gauge of economy or that they don't suffer from economic downturns, but there are individual stocks that can act independently. All in all, I recommend this book to anyone who is interested in economic analysis and not investing. Nov 28, Omar rated it really liked it. This review has been hidden because it contains spoilers.
To view it, click here. A read that supplemented my fledgling knowledge of finance. I had picked up some books from the library on related topics, and thought this would be a nice supplement to try to put my understanding to the test and triangulate some lessons learned and smarten up about what's going on when the DOW is above 23,, among other things In short, it's is a dry read, and the author's academic background exposition style comes through; however, in a world of irrational exuberance, where communicatio A read that supplemented my fledgling knowledge of finance.
In short, it's is a dry read, and the author's academic background exposition style comes through; however, in a world of irrational exuberance, where communication happens so fast, and policies are still in flux, it feels like a valuable book to have read that will make more sense over the long term.
View 2 comments. May 18, Samridhi Khurana rated it it was ok. It is a literature on the bubbles existing in the world of financial markets. Shiller takes us through the various bubbles that sustained themselves due to herd mentality and feedback mechanisms in the markets.
The underlying message of the book is to question the efficient market hypothesis and to caution the investors against the soaring markets due to amplification effects. Apart from this key message, I found most of the content to be repetitive and redundant. This book did not tell me a lot.
Humans are irrational creatures. Our financial market shares in this irrationality, despite what experts want to tell us.
Thus, we should try to hedge our bets as much as possible. O tarihte Nasdaq dot. An excellent inbetween book. Not too academic and dry but also not too simplistic. The most complete treatment of bubbles I've read. Shiller is a great empiricist, and tests out efficient markets hypothesis through various econometric tests and survey data.
Shiller actually asks investors through extensive survey data to see what their motivations and logic is, a pretty simple but radical move from assuming them to be rationally calculating agents. Through this data Shiller shows how irrational, An excellent inbetween book. Through this data Shiller shows how irrational, and self contradicting investment behavior can be. Additionally, Shiller does alot of searches through news and media in order to see if the news portion of efficient markets theory holds i.
To my knowledge both of these attempts at gathering data are novel and in hindsight obvious. An interesting take on speculative bubbles. Shiller shows at least to my satisfaction that 1 Bubbles in asset prices do exist and 2 We should look beyond pure financial theory to explain the behavior of bubbles. Shiller explores possible explanations for increases in asset price, and shows that at least, there is no real rational basis for certain increases in prices looking at population growth, construction price and interest rates do not explain the housing prices for example , and that certain implications of efficient markets are violated.
In particular, he could not find any news to explain large price movements, and that stock prices are too volatile compared to dividends growth an apparent violation of the Gordon discount model.
Shiller then goes on to suggest some possible explanations for the behavior of bubbles. He argues many factors, a combination of social, psychological and cultural factors. He goes in length about feedback loops, herd behavior, word of mouth contagion, and the role of media in drawing attention to issues.
Shiller discusses how certain vivid stories in particular "new era" theories can capture the imagination of investors and unmoor asset prices. Shiller also describes how irrational enthusiasm, mixed in with a convincing story can overwhelm quantitative fact and forecasts driving self-creating bubbles.
Sometimes investors, encouraged by the raise in prices, jealous of others "success" and with a gambler's high can pile on into markets. Shiller also surveys behavioral economics, in particular anchoring, and overconfidence in their roles in bubbles. This section actually seems a bit weak to me, Shiller seems to be throwing everything at the wall to see what sticks, and some of these explanations while I believe happen to be true are difficult if not impossible to falsify.
Ultimately, Shiller suggests improving markets by broadening participation, encouraging opinion leaders to educate investors and reducing short constraints for example creating markets to allow investors to short asset prices such as housing easily.
An enjoyable if somewhat technical at points read overall. The third edition of Irrational Exuberance by Shiller analyses and explains the influence of structural, cultural, and psychological factors in the creation of bubbles.
The book reads as the mix of an academic economic research paper and a popular non-fiction book, and contains an abundance of useful references to prior research.
Shiller does not shy away from expressing his own view throughout the book. This is particularly useful for the reader without an advanced economic background: Irrational Exuberance is an invaluable read for investors, but also particularly for economic students.
Shiller explains thoroughly how the structural, cultural, and psychological factors drive markets. Published in: Full Name Comment goes here. Are you sure you want to Yes No. Be the first to like this. No Downloads. Views Total views. Actions Shares. Embeds 0 No embeds. No notes for slide.
Irrational Exuberance 3rd edition to download this book the link is on the last page 2.
With high stock and bond prices and the rising cost of housing, the post-subprime boom may well turn out to be another illustration of Shiller's influential argument that psychologically driven volatility is an inherent characteristic of all asset markets. In other words, Irrational Exuberance is as relevant as ever. This edition expands its coverage to include the bond market, so that the book now addresses all of the major investment markets.
It also includes updated data throughout, as well as Shiller's Nobel Prize lecture, which places the book in broader context. No one whose future depends on a retirement account, a house, or other investments can afford not to read this book.
Book Details Author: Robert J. Shiller Pages: Hardcover Brand: Book Appearances 5. You just clipped your first slide!Shiller presents detailed examples that are designed to show that when prices fall rapidly they do so for reasons not connected to anything that would justify the price declines.
Overview[ edit ] Published at the height of the dot-com boom , the text put forth several arguments demonstrating how the stock markets were overvalued at the time. No one whose future depends on a retirement account, a house, or other investments can afford not to read this book. It comes off a bit "psychology light.
This the most valuable book in my collection.
She ca My review is both about the contents and how I got this book into my collection. While I agree that you need to consider all possibilities and investing is about probabilities, it is in I really battled to get into this book.