Bubbles have become a major focus of discussion in today's financial markets. But very few people actually define what they mean when describing this financial phenomenon.
In a recent Harvard Business Review blog post, Markus Brunnermeier, an economist at Princeton University and a member of the Institute for New Economic Thinking’s Advisory Board, had a go at it. Brunnermeier defines the leading characteristics of bubbles thusly:
"Bubbles are typically associated with dramatic asset price increases followed by a collapse. Bubbles arise if the price exceeds the asset’s fundamental value." Read more