Bubble
From ACT Wiki
Bubbles are market conditions in which prices are greatly in excess of 'fundamental' valuations.
The bubble is likely to burst at some future point, with a rapid fall in market prices.
It can often be difficult to detect the existence of a bubble before it has burst.
- False presumption delayed effective action
- "The prudential apparatus has worked in the past on the presumption that all movements in asset prices were based on fundamentals.
- This approach may prevent supervisors from dealing with excessive procyclicality until it is too late.
- The existence of bubbles, for instance, is impossible to prove until they burst.
- And, at least in the initial phase of a bubble, there is no lack of "fundamental" explanations for observed movements in asset prices."
- Jean-Pierre Landau, Deputy Governor of the Bank of France, BIS Review 94/2009.
See also
- Adaptive expectations
- Correction
- Crash
- Dislocation
- Efficient market hypothesis
- Fundamental analysis
- Herd behaviour
- Mean reversion
- Overshooting
- Procyclicality
- Random walk
- Rational expectations
- Speculation
- Supervisor
- Systemic risk
- Trend
- Volatility