Asset Price Bubble

An asset price bubble occurs when the prices of certain assets, like stocks or real estate, rise significantly beyond their intrinsic value, often driven by excessive speculation and optimism. Investors buy these assets hoping to sell them at even higher prices, leading to unsustainable growth. Eventually, the bubble bursts when prices correct sharply, causing significant losses for those involved. This phenomenon reflects irrational market behavior and can have broader economic impacts, affecting not just investors but the entire economy. Recognizing the signs of a bubble can help prevent financial crises.