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Title: Asset Price Bubbles: A Selective Survey - IMF Working Paper Post by: nrd525 on April 03, 2013, 06:33:25 AM http://www.imf.org/external/pubs/ft/wp/2013/wp1345.pdf
Some interesting ideas. 1. Rational investors may choose to ride the bubble before it bursts and increase the size of the bubble if they know that other people are using technical analysis and other trend/non-value based indicators. 2. A lack of short-selling opportunities makes bubbles more likely. During the internet bubble a lot of stock was held by people who were unable to sell it. 3. Bubbles are more likely in assets that don't end (ex. you are less likely to see a bubble in the bond market). 4. Over-valuations are more common than under-valuations. 5. There is a strong bias in favor of good news and bullish sentiment. Whereas negative news is downplayed. 6. The media provides more coverage of bubbles. 7. Bubbles are frequently accompanied by abnormally high trading volume. 8. Having experienced traders in a market decreases the probability of a bubble. |