In the summer of 2005 the second edition of the book was released, which focused on U.S. residential housing. That summer marked the peak in price for many markets in the United States, which then collapsed in the years ahead.
In an interview he gave this week Shiller told ETF.com that he is currently writing the third edition to his book. Here are his comments (for the full interview click here).
This is probably a question you're getting a lot lately: Are we in a period of irrational exuberance right now?
I'm actually working on the third edition of my book, "Irrational Exuberance." Anyway, it's a matter of degree—it's a matter of percentages. The market has been going up rapidly and there is some exuberance behind that, I suppose. But it's not something that is uniform. There is a story at any time, and the story has multiple dimensions.
One thing that our story now is starting to share in common with the year 2000, which was the peak of the market in real terms—the 2007 peak didn't make it back up to that level, so I think of 2000 as a major turning point—is at that time, people were very concerned that the market was overpriced. We have been seeing increased concerns that that would happen; that is a sign of a bubble. If you're buying and holding the market but think it's overpriced, that might be a sign of irrational exuberance.
What is irrational exuberance? I think it's often a sense that the market always goes up in the long run, and it's hard to predict when it might go down, but it will surely come back up. So one question I have been asking in surveys is, "Do you agree with the following statement: The stock market is the best investment for long-term holders who can just buy and hold through the ups and downs of the market." Our agreement with that is going up, but it's not as high as it was in 2000. We're not quite in a 2000-like irrational exuberance, but we're moving in that direction.
For more see: What If The Stock Market Fell & It Did Not Recover?