Irrational Exuberance Reconsidered - The Cross Section of Stock Returns

Does the stock market overreact? Recent capital market turbulences have cast doubt whether the behaviour of stock markets is in line with rational investor behaviour. To which extent stock returns are predictable is the question at the heart of the controversy between the paradigms of rational asset pricing and behavioural finance. This new and revised edition discusses the empirical evidence from both perspectives. Theory and empirical analysis are blended with feedback from security analysts to offer a road towards a deeper understanding of the underlying forces to drive performance in the stock market.
In his book "Irrational Exuberance" Robert Shiller offered an analysis of the US stock market in 2000. The focus of his book was the level of the stock market, which he thought to be overvalued at the time. This monograph offers a complementary analysis of the cross section of stock returns.

List of contents

I Irrational Exuberance Reconsidered.- 1 Stock Market Overreaction and Portfolio Management - An Interview with Barbara Rega, CFA, and Bernd Meyer, CFA.- 2 Scope of Analysis.- II Overshooting in the Cross Section of Stock Returns: The Winner-Loser Effect.- 3 Literature.- 4 Empirical Evidence for Germany.- III Explaining the Cross Section of Stock Returns: CAPM versus Fundamentals.- 5 Explaining the Winner-Loser Effect: Theory.- 6 The CAPM and the Winner-Loser Effect.- 7 Fundamentals and the Winner-Loser Effect.- 8 Fundamentals versus Beta - What Drives Stock Returns?.- IV Corporate Control.- 9 Reversals in Stock Returns and Temporary Problems of Corporate Control.- Conclusion.- References.- Author Index.- About the Author.

Summary

Does the stock market overreact? Recent capital market turbulences have cast doubt whether the behaviour of stock markets is in line with rational investor behaviour. To which extent stock returns are predictable is the question at the heart of the controversy between the paradigms of rational asset pricing and behavioural finance. This new and revised edition discusses the empirical evidence from both perspectives. Theory and empirical analysis are blended with feedback from security analysts to offer a road towards a deeper understanding of the underlying forces to drive performance in the stock market.
In his book "Irrational Exuberance" Robert Shiller offered an analysis of the US stock market in 2000. The focus of his book was the level of the stock market, which he thought to be overvalued at the time. This monograph offers a complementary analysis of the cross section of stock returns.

Additional text

From the reviews of the second edition:
"This book provides a highly stimulating contribution to the controversial discussion on stock return predictability, combining theory, thorough empirical analysis and feedback from security analysts." Günter Franke, Professor of International Finance, Chairman of the Center of Finance and Econometrics, University of Konstanz

"Irrational Exuberance Reconsidered takes a look at current turmoils in the stock market and provides an up to date discussion of the underlying issues." Harris Schlesinger, Professor of Finance and Frank Park Samford Chair of Insurance, University of Alabama

"State of the art analysis and new insights into the interaction between fundamentals and the stock market. Anybody interested in stock market overreaction should have a look." Winfried Pohlmeier, Professor of Economics and Econometrics, Research Professor at the Center of European Economic Research (ZEW)

"Compelling and intriguing: an interesting read for academics and practitioners alike. Current outlook: A strong buy." Dieter Hess, Professor of Finance, Hochschule für Bankwirtschaft, Frankfurt

"Combining academic research with practical experience, this book offers a new concept of a research monograph." Erik Lüders, Professor of Finance, Université Laval, Québec, and Visiting Scholar, Leonard N. Stern School of Business, New York University
"The present monograph investigates the so-called Winner-Loser Effect (WLE) and the questions, whether it may occur in rational pricing theory or is due to irrational behavior … . In my view, this book on finance has impact on the modeling … . Furthermore, the introductory review is from my understanding nice … . each unit within the monograph has an own introduction, outline and summary and can be read independently … . In conclusion, an interesting start for further research." (Andreas Bartel, ZentralblattMATH, Vol. 1089 (15), 2006)

Report

From the reviews of the second edition:
"This book provides a highly stimulating contribution to the controversial discussion on stock return predictability, combining theory, thorough empirical analysis and feedback from security analysts." Günter Franke, Professor of International Finance, Chairman of the Center of Finance and Econometrics, University of Konstanz

"Irrational Exuberance Reconsidered takes a look at current turmoils in the stock market and provides an up to date discussion of the underlying issues." Harris Schlesinger, Professor of Finance and Frank Park Samford Chair of Insurance, University of Alabama

"State of the art analysis and new insights into the interaction between fundamentals and the stock market. Anybody interested in stock market overreaction should have a look." Winfried Pohlmeier, Professor of Economics and Econometrics, Research Professor at the Center of European Economic Research (ZEW)

"Compelling and intriguing: an interesting read for academics and practitioners alike. Current outlook: A strong buy." Dieter Hess, Professor of Finance, Hochschule für Bankwirtschaft, Frankfurt

"Combining academic research with practical experience, this book offers a new concept of a research monograph." Erik Lüders, Professor of Finance, Université Laval, Québec, and Visiting Scholar, Leonard N. Stern School of Business, New York University
"The present monograph investigates the so-called Winner-Loser Effect (WLE) and the questions, whether it may occur in rational pricing theory or is due to irrational behavior ... . In my view, this book on finance has impact on the modeling ... . Furthermore, the introductory review is from my understanding nice ... . each unit within the monograph has an own introduction, outline and summary and can be read independently ... . In conclusion, an interesting start for further research." (Andreas Bartel, ZentralblattMATH, Vol. 1089 (15), 2006)

Product details

• Authors: Mathias Külpmann
• Publisher: Springer, Berlin
• Languages: English
• Product format: Paperback / Softback
• Released: 11.10.2010
• EAN: 9783642057267
• ISBN: 978-3-642-05726-7
• No. of pages: 230
• Dimensions: 156 mm x 235 mm x 234 mm
• Weight: 377 g
• Illustrations: XII, 230 p.
• Series: Springer Finance; Springer Finance
• Subjects: Social sciences, law, business > Business > Economics; C, Finance, macroeconomics, Finance, general, Macroeconomics and Monetary Economics, Macroeconomics/Monetary Economics//Financial Economics, Mathematics and Statistics, Applications of Mathematics, Finance & accounting, Monetary Economics, Economics, Mathematical, Quantitative Finance