The Madness of Markets:
In THE MADNESS OF MARKETS: Why Smart Investors Make Crazy Decisions – And How To Exploit Them (2026, Penguin Random House), London Business School Professor of Finance Alex Edmans synthesizes several decades of research in behavioural finance and asset pricing to explain why financial markets systematically depart from fundamental value. Edmans shows how psychological biases cause investors to overreact, underreact, and misreact, creating persistent market mispricing – and how investors can devise trading strategies to take advantage. Drawing on academic studies on topics such as bubbles and crashes, investor sentiment, herd behaviour, CEO character, intangibles, overconfidence, underreaction, and the disposition effect, the book explains both why these anomalies arise and how they spill over to the real economy. Written in an accessible and engaging style while remaining suitable as a course text, The Madness of Markets translates rigorous academic research into real-world stories and practical insights, demonstrating the relevance of behavioural finance for students, investors, companies, and policymakers.
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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.
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.
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.
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.
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.
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.
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.
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.
