Irrational Exuberance refers to a situation where asset prices rise excessively due to investor enthusiasm and optimism, beyond their actual fundamental value.
Irrational Exuberance occurs when investors become overly optimistic, driving prices higher without strong economic or financial justification. This often leads to market bubbles, which eventually burst and cause sharp declines.
The term was popularized by Alan Greenspan while describing overvaluation in financial markets.
"If stock prices rise sharply without improvement in company earnings, it may indicate irrational exuberance."