Uncommon
Economic bubble
Temporary spike in asset prices
Economic bubble
An economic bubble (also called a speculative bubble, asset bubble, or simply financial bubble) is a period when current asset prices greatly exceed their intrinsic valuation, where the valuation is justified by underlying long-term fundamentals of the asset. Bubbles can be caused by overly optimistic projections about the scale and sustainability of growth (e.g. dot-com bubble), and/or by the belief that intrinsic valuation is no longer relevant when making an investment (e.g. Tulip mania). They have appeared in most asset classes, including stocks (e.g. Roaring Twenties), commodities (e.g. 2007 uranium bubble), real estate (e.g. 2000s US housing bubble), and even esoteric assets (e.g. cryptocurrency bubble). Bubbles usually form as a result of either excess liquidity in markets, and/or changed investor psychology. Large multi-asset bubbles (e.g. 1980s Japanese asset bubble and the 2020–21 Everything bubble) are attributed to central banking liquidity (e.g. overuse of the Fed put). In...
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