Irrational Exuberance


Irrational Exuberance




The enthusiasm of investors that drives the prices of assets up to levels that are not supported by fundamentals is called as irrational exuberance. It was a phrase used by Alan Greenspan, the then-Federal Reserve Board chairman, who mentioned in his speech at American Enterprise Institute during the dot-com bubble in 190s. This interprets a warning that the market could be overvalued.
It is believed that irrational exuberance gives rise to creating a bubble for the prices of assets. When the bubble bursts, investors engage in a panic selling method where he might even reduce the selling price lower than its worth, which could also cause recession.
The phrase became a catchphrase during the economic recession that followed the stock market collapse in the year 2000 when bumper stickers read “I want to be irrationally exuberant” again in Silicon Valley and other places. The term gained a new currency after the US housing market collapse in the year 2008 which led to a worldwide financial panic.

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