Irrational Exuberance – Robert Shiller

Robert Shiller published Irrational Exuberance in 2000, during the Dot-com bubble, to explore the nature of investment mania and speculative bubbles. He encourages people to see the stock market prices, not as a standalone entity, but as the aggregation of people’s choices. And that we shouldn’t underestimate how common it is for our thinking to mimic the herd. Continue Reading …

Declining Labour Income Shares

In most developed countries, labour’s share of national income has fallen since the mid 1980s. Empirical studies found the shift from labour to capital intensive industries, or the impact of trade exposures and outsourcing, as unlikely to explain these trends entirely; and that the impact of globalisation, labour-capital bargaining power, capital accumulation and uneven technology adoption to be interesting and important considerations. Continue Reading …

Return on Invested Capital

Businesses must pass the one dollar test. That is, they must earn a return of invested capital (ROIC) in excess of the opportunity cost of capital. In their paper, Calculating Returns on Invested Capital, Credit Suisse’s M. Mauboussin & D.Callahan from Credit Suisse provide a helpful introduction to the topic. Continue Reading …

Predictably Irrational

Based on empirical evidence and ideas from experimental and behavioural economics, economist Dan Ariely describes common tendencies that lead individuals and groups towards patterns of irrationality and decision making traps, in his book Predictably Irrational: The Hidden Forces That Shape Our Decisions. Continue Reading …