In this timely and prescient update of his celebrated 2000 bestseller, Robert Shiller returns to the topic that gained him international fame: market volatility. Having predicted the stock market collapse that began just one month after the first edition was published, he now expands the book to cover other markets that have become volatile, particularly the recently red-hot housing market. He includes a full chapter on domestic and international housing prices in historical perspective.
Shiller amasses impressive evidence to support his argument that the recent housing market boom bears many similarities to the stock market bubble of the late 1990s, and may eventually be followed by declining home prices for years to come. After stocks plummeted when the bubble burst in 2000, investors moved their money into housing. This precipitated the inflated real estate prices not only in America but around the world, Shiller maintains. Hence, irrational exuberance did not disappear—it merely reappeared in other settings.
Building on the original edition, Shiller draws out the psychological origins of volatility in financial markets, this time folding real estate into his analysis. He broadens the evidence that investing in capital markets of all kinds in the modern free-market economy is inherently unstable—subject to the profoundly human influences captured in Alan Greenspan’s now-famous phrase, “irrational exuberance.” As was true of its predecessor, the second edition of Irrational Exuberance is destined to be widely read, discussed, and debated.
The impressive thing is that it has been written before the subprime crisis. The downside is that it would have been nice to have the interpretation of that crisis as well.
The first chapters are not as easy to follow because they are full of data not easy to remember and the author keeps referring to them throughout the book.
Overall written for laymen, so really recommended for those who want to learn a bit more about stock and house market without being overwhelmed by technicalities.
Shiller's a self confessed bear towards the current market and it definitely shows in his book.
It is an interesting read on the the non-quantitative factors that can affect the price of a stock (and a home..). It is also sobering read in light of the rising house prices and the bull market we have seen in the past year or so.
The final impression I got in the end was that nothing in the market (stock and housing) is guaranteed. And...to always do your due diligence!...Continua