Financial Market Bubbles and Crashes, Second Edition Features, Cause
Economists broadly define financial asset price bubbles as episodes in which prices rise with notable rapidity and depart from historically established asset valuation multiples and relationships. Financial economists have for decades attempted to study a
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FINANCIAL MARKET BUBBLES AND CRASHES FEATURES, CAUSES, AND EFFECTS
HAROLD L. VOGEL
Financial Market Bubbles and Crashes, Second Edition
Harold L. Vogel
Financial Market Bubbles and Crashes, Second Edition Features, Causes, and Effects
Harold L. Vogel New York, NY, USA
ISBN 978-3-319-71527-8 ISBN 978-3-319-71528-5 (eBook) https://doi.org/10.1007/978-3-319-71528-5 Library of Congress Control Number: 2018935300 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover image © Anna Nikonorova / Alamy Stock Photo Cover design by Jenny Vong Printed on acid-free paper This Palgrave Macmillan imprint is published by the registered company Springer International Publishing AG part of Springer Nature. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
To my dear parents, who would have greatly enjoyed seeing this.
Reprinted with permission from Kevin KAL Kallaugher, www.Kaltoons.com
Prologue
Bubbles are wonders to behold. They take your breath away and make your pulse race. They make fortunes and—just as fast or faster, in the inevitable stomach-churning crash aftermath—destroy them too. But more broadly, bubbles create important distortions in the wealth (e.g., pensions), psychology, aspirations, policies, and strategies of the society as a whole. Bubbles, in other words, have significant social effects and aftereffects. One would think, given the importance of the subject, that economists would by now have already developed a solid grip on how bubbles form and how to measure and compare them. No way! Despite the thousands of articles in the professional literature and the millions of times that the word “bubble” has been used in the business press, there still does not appear to be a cohesive theory or persuasive empirical approach with which to stud
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