Financial bubbles

A financial bubble occurs when the prices of assets, like stocks or real estate, rise rapidly beyond their intrinsic value, driven by excessive demand and speculation. This surge creates a false sense of value, attracting more buyers. Eventually, confidence drops or reality reasserts itself, leading to a sharp decline in prices—often causing significant financial losses. Bubbles are fueled by optimism, herd behavior, and sometimes misinformation, but they can't last forever. Recognizing the signs can help manage risk, though predicting their exact timing remains challenging.