Speculative bubbles

A speculative bubble occurs when the price of an asset, like stocks or real estate, rises far beyond its intrinsic value due to irrational investor behavior and hype. People buy in hopes of selling at even higher prices, often ignoring fundamentals like actual earnings or value. As more investors join the frenzy, prices soar until they reach a peak. Eventually, the bubble bursts when confidence wanes, causing prices to crash back down, often leading to significant financial losses for many participants. Understanding this phenomenon helps investors recognize the risks of emotional decision-making in markets.