Bubble Theory

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Dictionary Says

Definition of 'Bubble Theory'

A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these bubbles are easily identifiable. Former Federal Reserve Chairman Alan Greenspan famously coined the term "irrational exuberance" referring to asset bubbles. Under the bubble theory, large overvaluations of assets can persist for many years, but eventually burst, causing precipitous declines before returning to more reasonable prices.
Investopedia Says

Investopedia explains 'Bubble Theory'

One of the most famous historical examples of an asset bubble is the so-called "tulipmania" in the Netherlands during the 1630s. Contemporary examples include the dotcom bubble in the late 1990s, and the real estate bubble in the U.S. in the late 2000s.

The bubble theory is controversial among those who believe in the theory of efficient markets. Efficient market theorists believe that market participants are rational, and therefore would not buy into asset bubbles if they were readily identifiable. Rather, these theorists argue, clear overvaluations would be driven down to their true value by savvy market participants who would sell the asset, anticipating a decline to the true value. 

Search results for

'Bubble Theory'

  • 5 Steps Of A Bubble Slideshow | Investopedia

    http://www.investopedia.com/slide-show/5-steps-of-a-bubble
    ... greater fool" theory plays out everywhere. Valuations reach extreme levels during
    this phase. For example, at the peak of the Japanese real estate bubble in ...

  • 5 Steps Of A Bubble Slideshow | Investopedia

    http://www.investopedia.com/slide-show/5-steps-of-a-bubble/bubble-characteristics.aspx
    ... greater fool" theory plays out everywhere. Valuations reach extreme levels during
    this phase. For example, at the peak of the Japanese real estate bubble in ...

  • 5 Steps Of A Bubble Slideshow | Investopedia

    http://www.investopedia.com/slide-show/5-steps-of-a-bubble/profit-taking.aspx
    ... greater fool" theory plays out everywhere. Valuations reach extreme levels during
    this phase. For example, at the peak of the Japanese real estate bubble in ...

  • 5 Steps Of A Bubble Slideshow | Investopedia

    http://www.investopedia.com/slide-show/5-steps-of-a-bubble/euphoria.aspx
    ... greater fool" theory plays out everywhere. Valuations reach extreme levels during
    this phase. For example, at the peak of the Japanese real estate bubble in ...

  • 5 Steps Of A Bubble Slideshow | Investopedia

    http://www.investopedia.com/slide-show/5-steps-of-a-bubble/boom.aspx
    ... greater fool" theory plays out everywhere. Valuations reach extreme levels during
    this phase. For example, at the peak of the Japanese real estate bubble in ...

  • 5 Steps Of A Bubble Slideshow | Investopedia

    http://www.investopedia.com/slide-show/5-steps-of-a-bubble/panic.aspx
    ... greater fool" theory plays out everywhere. Valuations reach extreme levels during
    this phase. For example, at the peak of the Japanese real estate bubble in ...

  • 5 Reasons Gold Is The Next Bubble To Burst

    http://stocks.investopedia.com/stock-analysis/2010/5-Reasons-Gold-Is-The-Next-Bubble-To-Burst-ABX-GG-NEM0122.aspx
    ... Investors very well may be in the midst of a gold bubble that is ... gold prices still
    could move significantly higher as the greater fool theory kicks into high ...

  • 5 Steps Of A Bubble

    http://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp
    ... greater fool" theory plays out everywhere. Valuations reach extreme levels during
    this phase. For example, at the peak of the Japanese real estate bubble in ...

  • What is an echo bubble?

    http://www.investopedia.com/ask/answers/08/echo-bubble.asp
    ... More Categories; Bonds; Economics; Markets; Taxes; Financial Careers; Financial
    Theory; Investing; ... Feedback Feedback. What is an echo bubble? To ...

  • What burst the Mississippi bubble?

    http://www.investopedia.com/ask/answers/09/mississippi-bubble.asp
    ... What burst the Mississippi bubble? ... The Mississippi bubble is actually more
    of a currency blunder than a true speculative bubble. ...

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