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Toward Rational Exuberance: The Evolution of the Modern Stock Market
A professional stock trader with two decades of practical experience traces the evolution of popular theories of stock market behavior, showing how tey have become widely accepted over time and clarifies some of the theories.
342 pages, Hardcover
First published January 1, 2001
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Displaying 1 - 3 of 3 reviews
March 27, 2017
A mostly anecdotal history of the American Stock Market. Smith's thread, if there is one, is an argument for the efficient market hypothesis. But he never really tells us why us buying his argument has any importance. He in fact actually says that you can't prove efficient vs behavioralist anyway.
It's hard to write a finance book! My main takeaway is that "our" expectation for what the P/E ratio should be is very much a historical/human construct that is not based on any kind of reality.
For example, some people say that the historical rate of interest has hovered - since the beginning of time - around 4%. But we've seen that number pushed very low recently. Likewise with the P/E. For a while it seemed like it should be around 10 to 1, but we are now well above 25 to 1. It's a situation where the only reason to keep buying is that other people are still buying. Ie. you are not buying the stock for the dividend.
It's hard to write a finance book! My main takeaway is that "our" expectation for what the P/E ratio should be is very much a historical/human construct that is not based on any kind of reality.
For example, some people say that the historical rate of interest has hovered - since the beginning of time - around 4%. But we've seen that number pushed very low recently. Likewise with the P/E. For a while it seemed like it should be around 10 to 1, but we are now well above 25 to 1. It's a situation where the only reason to keep buying is that other people are still buying. Ie. you are not buying the stock for the dividend.
March 1, 2018
This came recommended at the end of Mr. Money Mustache's blog post about crypto-currencies, and I was immediately impressed by the depth and detail in Smith's historical account of the creation and evolution of the stock market.
His notes are incredible and more functional than just naming the "who" and the "when", he really explains how these events marked the times and helped push forward the constant understanding of the entire market system.
He captures every market player that I'd even tangentially heard of, even the ones that I'd forgotten from my business school days - JP Morgan, Clarence Barron, Fischer Black and Myron Scholes, Charles Dow, Charles Merrill, Warren Buffet, all the way to Peter Lynch and Alan Greenspan (the book was written in 2001). Somehow John Bogle didn't make the cut, but that can be forgiven, I suppose.
I'm not sure what I learned that can be applied now, but that's kind of the point. Everyone is still learning so much and there are so many mysteries regarding the human element and how it affects the stock market, but it's somehow comforting to know that the history of the market has constantly evolved to be more transparent and rational while maintaining its exuberance.
His notes are incredible and more functional than just naming the "who" and the "when", he really explains how these events marked the times and helped push forward the constant understanding of the entire market system.
He captures every market player that I'd even tangentially heard of, even the ones that I'd forgotten from my business school days - JP Morgan, Clarence Barron, Fischer Black and Myron Scholes, Charles Dow, Charles Merrill, Warren Buffet, all the way to Peter Lynch and Alan Greenspan (the book was written in 2001). Somehow John Bogle didn't make the cut, but that can be forgiven, I suppose.
I'm not sure what I learned that can be applied now, but that's kind of the point. Everyone is still learning so much and there are so many mysteries regarding the human element and how it affects the stock market, but it's somehow comforting to know that the history of the market has constantly evolved to be more transparent and rational while maintaining its exuberance.
June 24, 2018
The first half of the book was much more interesting
Displaying 1 - 3 of 3 reviews