Speculative Bubble


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Speculative Bubble

A situation in which prices for securities, especially stocks, rise far above their actual value. This trend continues until investors realize just how far prices have risen, usually, but not always, resulting in a sharp decline. Speculative bubbles usually occur when investors, for any number of reasons, believe that demand for the stocks will continue to rise or that the stocks will become profitable in a short time. Both of these scenarios result in increased prices.

A famous example of a bubble is the dot-com bubble of the 1990s. Dot-com companies were hugely popular investments at the time, with IPOs of hundreds of dollars per share, even if a company had never produced a profit and in some cases, had never earned any revenue. This came from the theory that Internet companies needed to expand their customer bases as much as possible and thus corner the largest possible market share, even if this meant massive losses. NASDAQ, on which many dot-coms traded, rose to record highs. This continued until 2000, when the bubble burst and NASDAQ quickly lost more than half of its value. Other famous examples include the tulip mania of the 1630s and the housing bubble in the early 2000s.
References in periodicals archive ?
The ADIB CEO's voice is not a lone cry in the wilderness; he joins what appears to be a growing chorus warning that the UAE could be stoking itself up for another speculative bubble.
Mr Gilmore said: "But this time we will be talking about real and sustainable jobs based on an export-led economy and not on a speculative bubble economy.
Some property developers warn it could trigger another speculative bubble similar to the one that burst in 2008-2010, when the global financial crisis caused Dubai property prices to crash by more than 50 percent, shaking financial markets around the world.
But Standard Chartered's report concluded: "Right now, we conclude that there are no serious indications of a speculative bubble in the housing market.
housing market has been in stabilization mode for only the past year or so following an eight-year run-up to the peak of the housing bubble in 2006 followed by what most homeowners who bought in that period know: a bursting of a massive speculative bubble that sent the nation into recession and millions of homebuyers into foreclosure.
The Socialist government is seeking to rescue an industry which has lost about 15,000 jobs in the last two years, after the previous conservative government tried to dampen a speculative bubble in new solar power installations.
That came to pass until the global financial crisis of 2008 and the mother of all liquidity squeezes that dashed Dubai property which, by then, had become a speculative bubble full of dodgy operators many of whom later ended up in prison.
According to Rabobank's International Food & Agribusiness Research and Advisory group, land value rates do not meet the criteria of a speculative bubble.
As other authors have noticed, there are many features of the recent speculative bubble that fit the trajectory he described.
People frequently ask me, as someone who has written on market speculation, where the next big speculative bubble is likely to be.
speculative bubble that pushed the price of Brent crude up to 147.
Therefore, a speculative bubble that distorts prices must distort consumption and production decisions.