Written by Robert J. Shiller
Irrational Exuberance: The term and its origin
Alan Greenspan used the terms ‘irrational exuberance’ during a speech in the year 1996. He used this specific term to imply that an investor’s uncertainty is reduced due to low inflation and it also minimizes risk premiums and ensures higher returns on one’s stock market returns.
Finance and The stocks
In trading and stock investment, this term is used to depict an investor’s unverifiable enthusiasm that in fact increases the value of assets that are not considered to be fundamental. That is overrating the value of the asset.
Determining whether or not an asset is experiencing illogical exuberance is very important. Economist Robert Shiller released his book titled ‘Irrational Exuberance’ in the year 2000. This book analyzes the stock market boom of 1982 in detail until it lasted up to the dotcom years.
His book talks about the twelve factors that were responsible for this boom. He also suggests certain policy changes that will help one to manage illogical exuberance. The second edition of the book also includes ‘housing bubble burst.
Must-haves for every trader and investor
As a trader and investor, staying up to date with the must-have books that help you win stock market increasing your profits becomes very necessary. The recent edition of this book is the fifth edition and is a must have that helps investors determine the asset value and not overrate it based on their emotions.