Irrational Exuberance

Irrational exuberance refers to an overenthusiastic and optimistic attitude among investors that often leads to asset bubbles. This phenomenon occurs when people buy stocks or other investments at inflated prices, driven by emotions rather than solid fundamentals. As prices rise, the excitement can grow, encouraging even more buying, despite unsustainable values. Eventually, this bubble bursts, leading to sharp declines in prices and financial losses. The term gained prominence from economist Robert Shiller's 2000 book, highlighting the psychological factors that can distort market behavior and impact the economy.