Speculative Bubble

Speculative Bubble
A spike in asset values within a particular industry, commodity, or asset class. A speculative bubble is usually caused by exaggerated expectations of future growth, price appreciation, or other events that could cause an increase in asset values. This drives trading volumes higher, and as more investors rally around the heightened expectation, buyers outnumber sellers, pushing prices beyond what an objective analysis of intrinsic value would suggest.

The bubble is not completed until prices fall back down to normalized levels; this usually involves a period of steep decline in price during which most investors panic and sell out of their investments.

May also be referred to as a "price bubble" or "market bubble".

Speculative bubbles have a long history in world markets; the progression of time along with economic advances has not slowed their arrival. In our modern financial markets, speculators can often make profitable bets when speculative bubbles burst by purchasing derivatives or shorting securities directly.

While each speculative bubble has its own driving factors and variables, most involve a combination of fundamental and psychological forces. In the beginning, attractive fundamentals may drive prices higher, but over time behavioral finance theories suggest that people invest so as to not "miss the boat" on high returns gained by others. When the artificially high prices inevitably fall, most short-term investors are shaken out of the market after which the market can return to being driven by fundamental metrics.


Investment dictionary. . 2012.

Игры ⚽ Поможем написать курсовую

Look at other dictionaries:

  • speculative bubble —   bolla speculativa   Rapida ascesa delle quotazioni azionarie verso valori insostenibili per i fondamentali delle società e dell economia, ad es. i corsi del Nasdaq nel periodo 1998 2000 …   Glossario di economia e finanza

  • bubble — bub‧ble [ˈbʌbl] noun [countable] 1. FINANCE when a lot of people buy shares in a company that is financially weak, with the result that the price of the shares becomes much higher than their real value: • A speculative bubble may have been… …   Financial and business terms

  • bubble — [[t]bʌ̱b(ə)l[/t]] bubbles, bubbling, bubbled 1) N COUNT Bubbles are small balls of air or gas in a liquid. Ink particles attach themselves to air bubbles and rise to the surface. ...a bubble of gas trapped under the surface. 2) N COUNT A bubble… …   English dictionary

  • Bubble Company — A company whose valuation greatly exceeds that suggested by its fundamentals. The first well documented bubble company was the South Sea Company, which caused the South Sea Bubble in 1720. A bubble company arises when speculators continuously buy …   Investment dictionary

  • speculative — securities that involve a high level of risk. Bloomberg Financial Dictionary * * * speculative spec‧u‧la‧tive [ˈspekjlətɪv ǁ leɪ ] adjective 1. FINANCE bought or done in the hope of making a profit: • Their £461 million bid for the electronics… …   Financial and business terms

  • Economic bubble — An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania or a balloon) is trade in high volumes at prices that are considerably at variance with intrinsic values… …   Wikipedia

  • Dot-com bubble — The dot com bubble (also referred to as the Internet bubble and the Information Technology Bubble[1]) was a speculative bubble covering roughly 1995–2000 (with a climax on March 10, 2000, with the NASDAQ peaking at 5132.52 in intraday trading… …   Wikipedia

  • Second dot-com bubble — There has been speculation of a second dot com bubble to succeed the first that occurred roughly between 1995 and 2001. Some refer to it as Bubble 2.0,cite news |url=http://news.bbc.co.uk/2/hi/business/6036337.stm |title=Has the dotcom boom… …   Wikipedia

  • Spanish property bubble — The residential real estate bubble in Spain saw Real Estate prices rise 247% from 1997 to 2005 [ [http://www.spainrei.com/MiV Spain Property Prices 95 07 yearly.htm According to the Spanish Ministry of Housing ] ] . € 651,168,000,000 is the… …   Wikipedia

  • Chaotic bubble — Many dynamical processes that generate bubbles are nonlinear, many exhibiting patterns consistent with mathematically chaotic dynamics (chaos theory). In such cases, chaotic bubbles can be said to occur. In most systems they arise out of a… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”