Tracing the History of Asset Price Bubble Theory

Sally Dubach

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: The literature on rational asset price bubbles has grown substantially, yet its internal logic is difficult to trace without reading across a large and technically demanding body of work. This paper provides a guide to the literature on rational asset price bubble theory, tracing its evolution from early overlapping generations models to environments with financial frictions, infinitely lived agents, and dividend-paying assets. Two mechanisms consistently sustain rational bubbles across these frameworks. The first is resale: investors buy above fundamental value, expecting to sell to subsequent buyers. The second is savings pressure that pushes the bubbleless equilibrium interest rate below the economy’s growth rate. Despite substantial theoretical progress, a gap remains between theoretical insights and the frameworks policymakers need.

Keywords: Rational bubbles; asset prices; dividend-paying assets (search for similar items in EconPapers)
JEL-codes: D84 E12 E44 G12 (search for similar items in EconPapers)
Date: 2026-05
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.vwiit.ch/dp/dp2604.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp2604

Access Statistics for this paper

More papers in Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft Contact information at EDIRC.
Bibliographic data for series maintained by Franz Koelliker ().