Great Throughts Treasury

"The ability to focus attention on important things is a defining characteristic of intelligence."

"It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble."

"But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"

"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, in the process amplifying stories that might justify the price increases and bringing in a larger and larger class of investors, who, despite doubts about the real value of an investment, are drawn to it partly through envy of others? successes and partly through a gambler's excitement."

"I believe that there is nothing essentially catchy about the phrase "Irrational Exuberance," but it lives on because the initial 1996 story of a stock market crash by nothing more than the utterance of those words led to a general interest in the phrase. The phrase survives in our language as more than a relic of one minor stock market episode because it has acquired a meaning that refers to the mindset that occurs during speculative bubbles like that of the 1990s."