The Misbehavior of Markets

"The Misbehavior of Markets," by Robert Shiller, explains that financial markets often behave unpredictably and irrationally, influenced by human emotions like greed and fear rather than just fundamental data. Shiller highlights patterns like bubbles and crashes, asserting they stem from collective psychology and overconfidence. Unlike traditional economic theory which assumes rational behavior, the book shows markets are complex, often driven by biases and narratives. Understanding these tendencies helps investors and policymakers better navigate the ups and downs, recognizing that markets don’t always follow logical patterns but are shaped by collective human behavior.