The name of the book is based on the phrase ‘irrational exuberance’ which wa used by the chairman of Federal Reserve Board, Alan Greenspan. He used the phrase during one his speeches which he gave at the American Enterprises Institute. He said “Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?” The phrase depicted that the market is overvalued to some extent.
Irrational Exuberance pdf Review:
The book was written by Robert Shiller in 2000 under the house of Princeton University Press. He is a Nobel Prize Winner Yale University professor who is an expert in his field. The book received many accolades and was received warmly by the readers. Shiller says that people have too much belief in the analysis of experts and they think that by being focused on he gyration of their investment, they will learn good fortune. He says that due to their blind trust, people fail to foresee the possible downfalls and declines in the market or loss in their investment.
Irrational Exuberance pdf Features:
- The first edition of the book talks about how the stock market was over valued at that time.
- The second edition talks about the Housing bubble that formed in the US in the 2000s. He claimed that the bubble would burst soon. He backed his claim by showing that the median prices of the houses were way greater than the median income.
- In the third edition, he talks about bonds. He mentions that the US stock prices are high and that holding long term bonds might not be a good idea.
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