Summary Of Irrational Ignorance Summary

Book Summary

On

Irrational Exuberance

By

Robert J. Shiller

Submitted By:

Reeya Rebecca Paul

PGP14115

Introduction

Irrational Exuberance is a book written by Robert J. Shriller. This book gets its name from the quote by Alan Greenspan, who was the chairman of the Federal Reserve Board in Washington, who used this term to describe the behaviour of the stock market investors. This book studies the various researches of the stock market boom at the turn of the millennium. According to the author, the high valuations of the stock market in the period of 2000 to 2005 was not justified. In the first chapter we can see the valuation in term of the Price-Earnings ratios from 1881 to 2000. The book then lists down 12 factors that helped the

The bubbles of speculation was clearly incited and stimulated through the news media. The different forms of available media, be it the newspapers, radio, television, or the internet, all of them are competing to get the public’s attention. Despite not giving detailed analysis much attention, the news media always came up with different specific reasons for any move in the stock market. They were able to justify each of their reasoning every time. The author also emphasized on how any news related to changes in the price influenced the behaviour of the investor. According to his survey which he conducted after the October 19th, 1987 crash, he asked the respondents to rate the stories which he listed, that were the recent events that he found relevant. This list included the news of the price decline on the October 14th. During that time, this was the only largest one-day point decline seen the Dow Industrials. What came as surprise was the fact how the stories which were related to decline in the prices in the past were regarded to be the most significant news events from the

New ear thinking doesn’t literally stands for being new. Actually, the advances in the Stock market in the late 1800s, 1920’s and 1960’s were also stimulated by the new era thinking. We can see what was the new ear thinking at different times, like during 1901, the railroads, big industrial trusts and the age of optimism was considered to be the epicentre of new era thinking. While during the 1920’s, the new era was signified through the electrical age for big cities and also the increasing use of the autos. While as discussed earlier as well, the 1960’s brought along the baby boom, low inflation rates and television proliferation, finally the 1990s was marked with the Internet boom, the new economy, low inflation and the alleged end of the business