Irrational Exuberance


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Irrational Exuberance

A term used by Alan Greenspan in 1996 to describe the dot-com bubble and, more broadly, the fact that the markets were overvalued. He was criticized at the time for talking down the market and stocks fell worldwide after he said it. However, his opinion was vindicated when the dot-com bubble burst, and irrational exuberance is still used as a catch phrase for overvalued markets.
References in periodicals archive ?
These individuals also suffered the after-effects of irrational exuberance, as did their firms when the housing market collapsed.
However we would strongly caution both analysts and investors against any irrational exuberance in what continues to be a difficult economic environment, with some company-specific challenges in H2," he added.
I wouldn't call it irrational exuberance but clearly everybody in Asia is ordering aircraft more than they really need," Grabowski told Reuters in an interview.
If you are an outsider looking at India, learn to filter out both the irrational exuberance and the excessive pessimism.
But economists typically see shorters' role as essential in financial markets because they introduce often-needed skepticism about a stock's price--that is, they counteract irrational exuberance.
An early example of the power of what may have appeared to some as irrational exuberance is the first Transcontinental Railroad-now considered to be the greatest technological achievement of the 19th Century.
Consider six conventionally accepted causes of the crisis: 1) low interest rates spurred a nationwide housing bubble, 2) government sponsored enterprises (think, Fannie Mae and Freddie Mac) loosened lending standards, 3) financial deregulation allowed a "shadow" banking sector to originate and securitize subprime loans, 4) bank bonuses incentivized short-term profit taking, 5) the risk premia on banks were artificially low because they were too big to fail, and 6) irrational exuberance fed the hysteria.
Their bets weren't short-selling in the traditional equities-market sense--which is a shame, because transparent shorting of stock plays an important role in tempering irrational exuberance.
Illusory or not, the consensus view is that some improvement is likely, but we'll probably not see any irrational exuberance from consumers this year.
The first close above the psychological level for the blue chip index in more than a year may inspire retail investors to throw their hat into the fray which could lead to a bit of irrational exuberance.
In the years leading up to the credit crisis, they made more conservative moves, Gural said, eschewing the irrational exuberance that lead many to overpay for space.