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  • Welcome to the Investors Trading Academy talking glossary of financial terms and events.

  • Our word of the day isBubble

  • A Bubble begins when the price of an asset rises far higher than can be explained by

  • fundamentals, such as the income likely to derive from holding the asset. The Chicago

  • Tribune of April 13th 1890, writing about the then mania in real-estate prices, described

  • "men who bought property at prices they knew perfectly well were fictitious, but who were

  • prepared to pay such prices simply because they knew that some still greater fool could

  • be depended on to take the property off their hands and leave them with a profit". Such

  • behavior is a feature of all bubbles. Famous bubbles include tulip mania in Holland

  • during the 17th century, when the prices of tulip bulbs reached unheard of levels, and

  • the South Sea Bubble in Britain a century later, although there have been many others

  • since, including the dotcom bubble in internet company shares that burst in 2000. Economists

  • argue about whether bubbles are the result of irrational crowd behavior perhaps coupled

  • with exploitation of the gullible masses by some savvy speculators or, instead, are the

  • result of rational decisions by people who have only limited information about the fundamental

  • value of an asset and thus for whom it may be quite sensible to assume the market price

  • is sound. Whatever their cause, bubbles do not last forever and often end not with a

  • pop but with a crash.

Welcome to the Investors Trading Academy talking glossary of financial terms and events.

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B1 bubble asset mania tulip property behavior

What is a Bubble?

  • 163 7
    richardwang posted on 2015/11/27
Video vocabulary