Wednesday, January 4, 2012

Book Review: Irrational Exuberance

Irrational Exuberance (2000) by Robert J. Shiller

This rather prescient book came out at the height of the dot-com boom, right before the tech bubble collapsed. It focuses on the factors that contribute to speculative bubbles in the stock market. Although some of the discussion was interesting, I found the text to be somewhat dry and verbose at times. I did not like the fact that some of the author's conclusions were based on his own small questionnaire surveys rather than on studies involving more rigorous methodology. His argument against the Efficient Market Hypothesis was interesting and I agree with him that psychological factors play a major role in investor behavior. However, the book ends with a very gloomy outlook – the author more or less indicates that he does not think the stock market will be a good place for future investments – but this conclusion was likely influenced by the prospect of an imminent bubble collapse at the time the book was written.

Note: I read this book in November 2011.

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