- Hardcover: 392 pages
- Publisher: Princeton University Press; 3 edition (January 25, 2015)
- Language: English
- ISBN-10: 0691166269
- ISBN-13: 978-0691166261
- Product Dimensions: 6.8 x 1.5 x 9.8 inches
- Shipping Weight: 1.5 pounds (View shipping rates and policies)
- Average Customer Review: 229 customer reviews
- Amazon Best Sellers Rank: #113,188 in Books (See Top 100 in Books)
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Robert J. Shiller, Co-Winner of the 2013 Nobel Prize in Economics
Winner of the 2000 Commonfund Prize for the Best Contribution to Endowment Management Research
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
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
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
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
Informative and well-argued . . . A calm and reasonable antidote to today's euphoria.---Jeff Madrick, New York Review of Books
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
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
Shiller has provided an accessible guide to the usually impenetrable literature on financial markets, especially the American stock market. (Foreign Affairs)
About the Author
Robert J. Shiller, the recipient of the 2013 Nobel Prize in economics, is a bestselling author, a regular contributor to the Economic View column of the New York Times, and a professor of economics at Yale University. For more information, please go to www.irrationalexuberance.com.
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Will history repeat itself with this third volume? That is hard to say. In this latest edition, Professor Shiller updates his argument, and augments the text to reflect developments since the 2005 second edition. Of particular interest, he adds an important new chapter on the bond market, which many feel is also in bubble territory. The good news is that, while Professor Shiller says that returns in all asset classes are likely to be subpar for some years given today's elevated asset prices, the mood is less somber than in previous editions, and there are no warnings of imminent doom, as in previous editions. In particular, he does not see a classic "bubble" in bonds, due to the lack of "exuberance" -- prices for bonds are being bid up reluctantly by investors, he says, which is not the formula for a bubble. However, he certainly balances that somewhat comforting news with a realistic view of the risks that the current situation presents to investors and savers of all types, stocks, bonds, housing, and savings accounts. His main piece of advice to all Americans concerned about their financial future may be the most sensible piece of financial advice ever written: spend less, save more! Yes, we all know that, but when the winner of the 2013 Nobel prize says that, it really means something.
I find Professor Shiller's writing style highly enjoyable, not at all like most economics books. The plain-spoken style is smart, wry, and often witty, and there are almost no mathematical formulas, except in the occasional technical notes in back. The book also talks about a lot of factors that are intrinsically interesting to non-economists. For example, it has chapters devoted cultural factors in investing; the effects of the news media; "new era" economic thinking; psychological factors; psychological anchors for the market and herd behavior.
Professor Shiller ends by offering a lot of good, commonsense advice to both policymakers and investors, large and small. I highly recommend this book to anyone who wants to understand what's behind the current anxiety, turmoil, and hopes, for a brighter financial future for all Americans.
The second edition of Irrational Exuberance warned of a housing market bubble. The key takeaway was to diversify. A few years later, the sub-prime crisis hit and both stocks and house prices corrected.
This, the third edition, warns about a number of things. And there seems to be no place to hide. Interest rates on bonds are historically low and unattractive. US stock prices are high. Yet historically speaking, Shiller thinks stocks could continue to rise higher for a while longer. Housing prices have rebounded in the US and are at bubble levels in other countries. The key takeaway seems to be we should hedge risks, and invest in assets that correlate negatively with labor income. The only concrete hedging suggestions from Shiller sadly all come with significant complexity and a heavy time premium.
While it might seem preposterous to state that we are in a bubble so recently after two other bubbles popped, Shiller reassures us that it is perfectly normal for markets to collapse, then recover, only to collapse again shortly thereafter. The example given is the lead up to the great depression.
There is not much new content in the third edition, compared to the excellent previous edition. A new preface, a new chapter on bonds (chapter 2), some additional precipitating factors at the end of chapter four, and a revised call to action in chapter 13.
The chapter on bonds is seven pages long, and mostly highlights what is well known, which is that bonds are currently an unattractive diversification strategy. Shiller states bonds are not technically in a bubble, because they are being so reluctantly purchased. Yet there is still a significant downside risk to holding long term bonds.
With this said, the reason I give it four stars is because the book is somewhat difficult to digest at times; the points made are subtle and may require a second or third read-through in order to gain some real insights that one will remember after finishing up the 237-page main text followed by 32-page appendix which is the author's Nobel prize speech. The casual reader might be bored by the charts and the descriptions of the tools used to discuss the market price dynamics which are the focal point of the text. With this said, the appendix is definitely geared toward the reader with an academic background in research related to financial markets. I debated whether to give the book five stars purely on the scholarship involved and the value of the text for investors, but with a five-point system on Amazon it leaves much less room to be accurate in rating (I'd give this 9 out of 10 on a ten-point scale).
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