Summary of Robert J. Shiller's Irrational Exuberance , livre ebook

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Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, and in the process, amplifies stories that justify the price increase.
#2 The Dow Jones Industrial Average, a stock market index, peaked in January 2000 at 11,722. 98. The real (inflation-corrected) Dow did not reach this level again until 2014.
#3 The stock market boom from 1982 to 2000, which I will call the Millennium Boom, was not justified in any reasonable terms. Basic economic indicators did not come close to tripling over that period, and corporate profits rose less than 60 percent.
#4 The end of the 2000 boom brought stock markets down across much of the world by 2003, as can be seen in Figure 1. 2. The next boom, peaking in late 2007 or early 2008, had huge impacts over much of the world.

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Publié par	Everest Media LLC
Date de parution	25 mars 2022
Nombre de lectures	0
EAN13	9781669364702
Langue	English
Poids de l'ouvrage	1 Mo

Informations légales : prix de location à la page 0,0150€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

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Insights on Robert J. Shiller's Irrational Exuberance
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3 Insights from Chapter 4 Insights from Chapter 5 Insights from Chapter 6 Insights from Chapter 7 Insights from Chapter 8
Insights from Chapter 1

#1

Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, and in the process, amplifies stories that justify the price increase.

#2

The Dow Jones Industrial Average, a stock market index, peaked in January 2000 at 11,722. 98. The real (inflation-corrected) Dow did not reach this level again until 2014.

#3

The stock market boom from 1982 to 2000, which I will call the Millennium Boom, was not justified in any reasonable terms. Basic economic indicators did not come close to tripling over that period, and corporate profits rose less than 60 percent.

#4

The end of the 2000 boom brought stock markets down across much of the world by 2003, as can be seen in Figure 1. 2. The next boom, peaking in late 2007 or early 2008, had huge impacts over much of the world.

#5

The boom and crash in the stock market in the years after 1994 are related to the behavior of earnings. As can be seen in Figure 1. 1, SP Composite earnings grew very fast in the late 1990s before they crashed after 2000, rose again until 2007, and then utterly crashed in 2009.

#6

The price-earnings ratio is a measure of how expensive the market is relative to an objective measure of the ability of corporations to earn profits. The ten-year average smooths out events such as the temporary burst of earnings during World War I, the temporary decline in earnings during World War II, and the frequent boosts and declines that we see due to the business cycle.

#7

The price-earnings ratio, which measures the value of a company based on its stock price, dropped dramatically between 2000 and 2001. This was due to the investor psychology changes that produced the decline in the market.

#8

There have been three previous times when the price-earnings ratio reached high values, in June 1901, September 1929, and December 1958. The ratio attained a value of 32. 6 in September 1929, and the market tumbled from that high with a real drop of 80. 6 percent by June 1932.

#9

The third instance of a high price-earnings ratio occurred in January 1966, when the ratio reached a local maximum of 24. 1. This peak came after a dramatic bull market and after a five-year real price surge of 52 percent from May 1960.

#10

The stock market has continued to rise, and in 2017, the news media celebrated new records set by the stock market. But people know that the market was then and is now highly priced. They are uncomfortable with this fact.
Insights from Chapter 2

#1

The path of interest rates through time has been a matter of intense public concern, for interest rates are viewed as central to everything in the economy. However, they show fluctuations through time that reveal a speculative and human component, not unlike the stock market.

#2

The Fed Model, which states that interest rates and the stock market are closely linked, is weak. Interest rates do affect the stock market, but stock prices do not show any simple or consistent relation with interest rates.

#3

The CAPE has come under some criticism since the second edition of this book. Bill Gross, founder of PIMCO and now at Janus Capital, complained that discussions of the ratio do not take into account the low interest rates since the crisis.

#4

There is a positive relationship between interest rates and preceding long-term inflation rates for much of the last half century, but there is no relationship between long-term interest rates and future long-term inflation.

#5

The long-term bond market is not well described by the information about future inflation and short-term interest rates, which are the only factors that affect interest rates in the short term. They have a speculative component that is hard to pin down in terms of objectively rational behavior.

#6

The concept of real interest rates was not introduced until 1895, and it was not until after 1960 that it became common. The significance of long-term interest rates is not clear, as people were not pricing bonds as if they were just reacting to rational expectations about future inflation rates.

#7

The bond market has been growing over the past few decades, but it is still not as important as the stock market. The prices of inflation-indexed bonds have reached very high levels, and this should be taken into account when thinking about the future.
Insights from Chapter 3

#1

The market for real estate, particularly individual homes, is likely to display speculative booms from time to time, since the psychological importance of the price of the places we see every day and the homes we live in is strong. However, real estate booms have not occurred everywhere.

#2

The home price index is shown in Figure 3. 1, along with building costs, the population of the United States, and the long-term interest rate since 1890. The recent rapid appreciation of home prices from the late 1990s to 2006 attracted notice.

#3

The ascent in home prices after 1998 was much faster than the increase in incomes, and this raised concerns about the long-run stability of home prices. According to Standard Poor’s and the SP/Case-Shiller Home Price Indices, the cost of buying a house relative to renting doubled in the United States from 1997 to 2006 and then fell almost all the way back down from 2006 to 2013.

#4

The American home price boom of the past few years is difficult to predict. It is difficult to judge whether the trend is building up or slowing down, and when it might eventually stop completely and then reverse itself.

#5

The chart shows that real home prices were generally declining from 1890 to 1940. The late nineteenth century and early twentieth century saw many local bubbles surrounding the building of highways, canals, and railroads, but these did not show up in the national numbers.

#6

The housing market did not have a speculative boom after World War II, unlike the early 2000s. People were not afraid of being priced out of the market, and they did not fully anticipate the home price increases to come.

#7

There is no single national home market in the United States, but there are regional markets. The period of home price increase starting in 1998 was concentrated in some states and metropolitan areas, and there were many stories about the psychological correlates of the boom.

#8

The big glamorous cities, and the regions surrounding them, seem to be the places where these bubbles happen. The similarity in the price paths of these cities is striking, as is the similarity of popular stories of exaggerated excitement about and speculation in homes.

#9

The cities shown in Figure 3. 3 were selected based on their newsworthiness and volatility in price movements. The Global House Price Index, produced by the International Monetary Fund for 52 countries around the world, shows much less volatility, and some other world cities showed a very different pattern.