Irrational Exuberance

By reading this koob, you’ll discover how and why the Efficient Markets Hypothesis has gone too far. For proof, the words “irrational exuberance,” first uttered in 1996, triggered investor stampedes and world market crashes.

You will also learn:

-Why people keep making the same mistakes;

-How mathematical models of rational behavior prove faddish, over and over;

-Stories of market bubbles, driven to dizzying heights by financial psychology and news flows;

-How prominent people have led to market madness and economic instability; and

-Intuitive economic models, as an alternative, also rarely fail to disappoint.

“Irrational exuberance” is a catchphrase made famous by former Fed chairman Alan Greenspan during the notorious dot.com bubble of the 1990s. After repeat disasters, like the housing bubble of the early 2000s and speculative bubbles that heralded the 2007–2009 world financial crisis, are investors any wiser? Worse, is it even possible to know when a market is in a bubble?

Nobel Prize–winning economist and Yale University professor Robert Shiller puts this speculative behavior into perspective. On the one hand, price volatility—which leads to substantial profit—is a powerful motivator in a free market. On the other, instability—which exacts a terrible toll on unwary investors—is a risk that the Fed might well do to rein in. A survey of ways and means provides you with vital lessons learned…or perhaps sadly unlearned? But you’ll get one surefire reward: you’ll know how you too can lower your exposure to the agony of the next economic bubble.