A stock market bubble is a type of economic bubble that occurs when market participants drive stock prices above their fair value. Such distortions inevitably lead to a bursting of the bubble, just as we experienced in the past year.
The existence of stock market bubbles is at odds with the assumptions of the efficient-market hypothesis which assumes rational investor behavior. Behavioral finance theory attributes stock market bubbles to cognitive biases that lead to group-think and herd behavior.
Here are the fourteen bubbles. Click, if you wish, to enlarge.
These bubbles in history are:
1. Tulip Mania in Holland (1637)
2. South Sea /Mississippi Company Bubbles (1720)
3. US Railway Mania (1893)
4. Florida Speculative Building of Housing Mania (1920-23)
5. Roaring 20's Stock Market Bubble (1924-29)
6. Poseidon Bubble (1969)
7. Gold (1980)
8. Japanese Asset Bubble (1997)
9. Dot Com/Tech/Telecoms (1998-2001)
10. Global Real Estate/Credit Bubble (2007)
11. China/Shanghai Index Stock Bubble (2008)
12. Commodity Bubble (2008)
13. Oil Bubble (2008)
14. Leverage/Derivative/Financial Bubble (2009)
In 300 years there were only five bubbles--now look what has happened in the last 40 years, and in particular with all the speculation in the past decade!
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