ECONOMIC BUBBLE

ECONOMY

Asset prices that are above their intrinsic value because present owners think they can sell the assets for more money in the future are referred to as bubble. The four primary strands of models that determine the circumstances under which bubble can exist are as follows. The first category of models makes the assumption that every investor has reasonable expectations and access to the same information. These models lead to the verifiable inference that the bubble must travel among an explosive route. The second group of models, investors are asymmetrically educated, and because bubbles need not to be well known, they can occur in a wide range of circumstances. A third group of models is where in how rational and behavioral traders interact in this kind of model. In the final group of traders past opinions are varied and presumably as a result of psychological biases and as a result they concur to disagree regarding the assets fundamental value

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