Irrational exuberance is written by Nobel
Laureate Robert J. Shiller who is currently a professor of economics at Yale
University. This book was first published by Princeton University Press in year
2000 which was coincided with the dot com boom period. It is a business book in which the author
tries to transparent the factors that caused the stock market booms in 1800s,
1920’s, 1950s-60s, and late 1990s. Beyond analyzing the factors that caused the
stock market booms, the author also offers readers solutions on how to deal
with future speculative bubbles. This book is one of the main critiques of
efficient market theory. The title of this book was named after Alan
Greenspan’s Speech in 1996 regarding the behavior of stock market
investors. It means unsustainable
investor enthusiasm that drives asset prices up to levels that are not
supported by fundamentals (INVESTOPEDIA, 2014).
After an introduction to stock market
historical context, the book was written into five parts. Part one was about
the 12 structural factors that influenced the market from 1995-2000. Shiller had identified 12 factors that are
not grounded in sensible economic fundamentals in explaining the surge of stock
market during 1990s. Part two of the book emphasized on cultural changes that
leverages stock market boom in late 1990s and other speculative booms. Cultural
changes was a result of the news media and of new era economic thinking. Part
three discussed about the basic psychological factors-psychological anchors for
the market and herd behavior that bear on the plausibility of speculative
bubbles. Part four of the book examined the arguments against irrational
exuberance. In other words, it focuses on the attempts to rationalize
exuberance. The last part of the book was about Shiller’s suggestions regarding
policy options and action that should be taken to prevent future speculative
bubbles.