| What is an asset bubble? An asset bubble occurs when a large number of buyers, normally not usually prone to speculate in an asset, bid the price of that asset much higher than underlying valuations would support, most often fueled by leverage or borrowed money. Typically, towards the terminal phase of the bubble the most compelling reason for continuing to buy the asset is due to the rising price itself, as all caution is thrown to the wind amid the collective belief that prices can only move higher still.
Then, when the last possible speculator has purchased the asset, the inevitable occurs and the price of the asset collapses as previous buyers turn into sellers and attempt to get out...............................................Full Article: Source |