Friday, Dec 28, 2007
Sums it all up really.....
Purdue University: ANALYSIS OF BUBBLES: from inception to aftermath of its burst
This is a very interesting read. I thought the following of particular interest:- ''The dangerous [type of bubble investor] comes...when the second type of speculator enter into the game. This type is related to what is known as the “greater fool theory” which states that an asset should be purchased as long as there exists at least one “greater fool” to whom that same asset can be sold at a higher price.''
Posted by hpwatcher @ 10:12 AM (599 views) Add Comment
3 Comments
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1. jack c said...
Extract from this excellent article - "It is a well known fact that, in cases of mass speculative crazes, the markets cannot sustain the high prices indefinitely and, eventually, the bubbles burst causing severe damage to the market and individual investors"
The rapid expansion of BTL properties/mortgages has brought a significant amount of speculation to the UK housing market in recent years - those that believe any any downturn will be different to the early Nineties are correct (expect it to be much worse and more prolonged)
2. hpwatcher said...
''At the beginning of the bubble there are market participants who make money because of the increasing value of the assets, contributing to the increasing bubble and impeding most of the investors to see and foresee the bubble they are currently experimenting. Finally, the bubble reaches its break point where everybody argues the existence of such bubble, losing money and taking the economy to a worse state''
We have got to this stage, where the bubble has been defined - and is now bursting!
3. Bertie Bunfest said...
This paper is second-rate, second-hand and semi-literate. It should not be listed on a blog alongside real publications. I like the blog generally but this sort of thing dilutes it.