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Economic Bubble (Market Bubble)

Last updated 23rd Sep 2022


The term economic bubble refers to a condition where the price of an asset moves into a range that significantly deviates from its fundamental value. Economic bubbles typically occur because of overly optimistic, or unrealistic, investor sentiment.


Also known as a market bubble, an economic bubble is formed when investors hold unrealistic views of an asset's value. Typically associated with a financial market, such as the stock market, the term can also apply to economies, an individual security, or a specific business sector. An economic bubble's lifecycle occurs in two phases:

  • Bubble Formation: investors push the price of an asset upwards, well beyond its fundamental value.
  • Bubble Burst: investor confidence in, or sentiment towards, the asset wanes resulting in a rapid sell off of the asset and a corresponding drop in price.

Related Terms

market crash, dot-com bubble, catalyst, black swan event, gray swan event

Moneyzine Editor

Moneyzine Editor