Publication Date

4-26-2002

Abstract

While many economists define a "bubble" as a deviation from stock market fundamentals, Charles Kindleberger defines a bubble as an upward price movement over an extended range that tends to implode (Kindleberger 1996). An extended negative bubble is a crash. The nature of these beasts makes them very important to the investor. Business schools teach students about the efficient market hypothesis and the economically rational individual. Bubbles make investing difficult because prices deviate from their fundamental valuations. If market fundamentals can not predict prices, the investor is forced to learn new ways of investing.

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Economics

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Economics Commons

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