An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, or a speculative mania) is “trade in high volumes at prices that are considerably at variance with intrinsic values”.[1][2]
While some economists deny that bubbles occur,[3] the cause of bubbles remains a challenge to those who are convinced that asset prices often deviate strongly from intrinsic values.
While many explanations have been suggested, it has been recently shown that bubbles appear even without uncertainty,[4] speculation,[5] or bounded rationality.[6]
Most recently, it has been suggested that bubbles might ultimately be caused by processes of price coordination[7] or emerging social norms.[6] Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often conclusively identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst.
