Irrational Exuberance by Robert J Shiller

Irrational Exuberance is a seminal work on market valuations.

First published in March 2000, it compared the US stock market valuations to historical market valuations using both the tradition price earnings (PE) metric as well as a cyclically adjusted price earnings (CAPE) measure. The conclusion was the US stock market was overvalued compared to earnings.

A few months later, the dot com market crashed.

Revised in 2005, it compared US housing prices to historical prices using Shillers' own inflation adjustments as well as by comparing housing prices to housing rents. The conclusion was the US housing market was overvalued compared to historical inflation adjusted prices and compared to current rents.

A few years later, the US housing market crashed.

Revised a third time in 2015, it concluded that bond yields were globally unattractive, the stock market was overheated, the global housing market was frothy, and only the US housing market seemed reasonably priced.

The penny has not yet dropped, but that doesn't stop the media trotting out Shiller whenever the market drops a few percentage points.

This book has created the Case-Shiller housing index, and has generated substantial debate about the usefulness of CAPE vs PE.