The Madness of Markets
“A fascinating and indispensable guide to the hidden psychology that drives markets.”
Annie Duke
A groundbreaking look at what drives even the smartest investors to make irrational choices and a practical roadmap for profiting when the market loses its mind – from one of the world’s leading finance professors
Why did Isaac Newton lose a fortune in the South Sea Bubble? Why did people spend millions on cartoon apes during the NFT frenzy? Why does the stock market fall when a national soccer team loses, or rise on a sunny day?
In this lively, eye-opening, and highly practical book, Alex Edmans reveals the hidden psychological forces that push markets away from logic – and create opportunities for those who stay sane while others panic. Drawing on cutting-edge studies and his more than twenty years at the intersection of academia and Wall Street, Edmans explains why investors chronically overreact, underreact, and misreact – and how these mistakes lead to bubbles, crashes, hype cycles, portfolio wipeouts, and mass layoffs.
But The Madness of Markets isn’t just about spotting irrationality – it’s about outsmarting it. Edmans shows you how to think sharper, invest smarter, dodge predictable traps, and recognize when the crowd has lost the plot. Playfully rigorous and packed with unforgettable stories – from Reddit frenzies to CEO ego trips to World Cup upsets – The Madness of Markets offers an accessible yet thorough guide for anyone looking to make smarter decisions in a noisy financial world.
This book is for anyone with a pension, an IRA, or a long-term stake in the market – whether you’re chasing crypto highs or simply protecting your retirement while the world spins out of control.
“A fascinating and indispensable guide to the hidden psychology that drives markets. Alex Edmans brilliantly explains how emotion, bias, and inertia lead even the smartest investors astray — and provides practical lessons for investing more wisely.“
Annie Duke
Decision strategist and author of Thinking in Bets and Quit
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“At a time when markets often seem to be going mad, amid wild AI hype, Edmans’ book offers a cool-headed compass that enables you to navigate the world of finance and — most importantly — your own emotions. Punchy, witty and provocative, this enables anyone to work out whether they are over or under-reacting to events, and chart a more level-headed approach to reading market signals.”
Gillian Tett
Financial Times columnist and author of Anthro-Vision
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“This book serves two purposes: it is an incredibly useful and entertaining handbook — but it is also a warning. Numbers often lie — in large part perhaps we prefer it that way.”
Rory Sutherland
Vice Chairman of Ogilvy and author of Alchemy
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“We sometimes forget that the “market” reflects the consensus view of human beings, with all their strengths and frailties, and that the line between crowd wisdom and crowd madness is a fine one. This book by Professor Edmans reminds us of that truth, and it is filled with useful insights for investors, while being fun to read. While many behavioral finance books are centered on how investor psychology can skew pricing, this book follows through by offering actionable advice on how investors can take advantage of these mistakes.”
Aswath Damodaran
NYU Stern professor and author of The Little Book of Valuation
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“Alex Edmans has an extraordinary knack for turning your preconceptions about business and the economy on their head. The Madness of Markets is no exception. A clear, penetrating look at how even the most rational brains can be swayed by mood and momentum. The ideal user’s guide to the next financial bubble.”
Ed Conway
Economics and Data Editor at Sky News and author of Material World
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“The Madness of Markets is essential reading on how markets work. Grounded in sound research, Alex Edmans entertainingly reveals what drives the market’s mood swings and how to capitalize on the opportunities they create.”
Michael Mauboussin
Managing Director at Morgan Stanley and author of More Than You Know
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“A maddeningly good read. Both a handy guide to common investment pitfalls and a delightful romp through the weird behaviour and phenomena that dog the supposedly efficient stock market.”
Robin Wigglesworth
Financial journalist and author of A Fabulous Debt
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“In this smart, engaging book, Edmans offers a masterclass on the psychological forces that shape financial markets and investment decisions. The Madness of Markets is a must-read for anyone interested in behavioral finance.”
Katy Milkman
Wharton professor and author of How to Change