Asset Price Bubbles: A Selective Survey
February 21, 2013
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Summary
Why do asset price bubbles continue to appear in various markets? This paper provides an overview of recent literature on bubbles, with significant attention given to behavioral models and rational models with frictions. Unlike the standard rational models, the new literature is able to model the common characteristics of historical bubble episodes and offer insights for how bubbles are initiated and sustained, the reasons they burst, and why arbitrage forces do not routinely step in to squash them. The latest U.S. real estate bubble is described in the context of this literature.
Subject: Asset bubbles, Asset prices, Financial crises, Financial institutions, Housing prices, Inflation, Prices, Real estate prices, Stocks
Keywords: Asset bubbles, Asset prices, bubble asset, Bubbles, discount rate, equilibrium price, Europe, fair value, Financial Crisis, growth decrease, Housing prices, internet bubble, Limits to Arbitrage, long position, market price, overvalued asset, paper money, price limit, rate of return, Real estate prices, share price, Stocks, subprime mortgage, WP
Pages:
41
Volume:
2013
DOI:
Issue:
045
Series:
Working Paper No. 2013/045
Stock No:
WPIEA2013045
ISBN:
9781475515299
ISSN:
1018-5941
