Overview
A market bubble is a phenomenon where the price of an asset or asset class surges far beyond its intrinsic value, driven by speculative fervor rather than fundamental economic justification. These periods are characterized by rapid price appreciation, often fueled by a combination of excess liquidity, herd behavior, and optimistic narratives that dismiss traditional valuation metrics. Bubbles can manifest across diverse markets, from historical examples like tulip bulbs and internet stocks to modern instances in real estate and cryptocurrencies. The bursting of a bubble typically leads to sharp price declines, significant financial losses, and can trigger broader economic downturns, making their identification and management a perennial challenge for investors and policymakers alike.