Asset Price Bubbles: A Selective Survey

Anna Scherbina

No 2013/045, IMF Working Papers from International Monetary Fund

Abstract: Why do asset price bubbles continue to appear in various markets? This paper provides an overview of recent literature on bubbles, with significant attention given to behavioral models and rational models with frictions. Unlike the standard rational models, the new literature is able to model the common characteristics of historical bubble episodes and offer insights for how bubbles are initiated and sustained, the reasons they burst, and why arbitrage forces do not routinely step in to squash them. The latest U.S. real estate bubble is described in the context of this literature.

Keywords: WP; discount rate; rate of return; subprime mortgage; fair value; share price; Bubbles; Limits to Arbitrage; Financial Crisis; overvalued asset; long position; price limit; market price; equilibrium price; paper money; growth decrease; internet bubble; bubble asset; Asset bubbles; Asset prices; Housing prices; Real estate prices; Stocks; Europe (search for similar items in EconPapers)
Pages: 41
Date: 2013-02-21
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (54)

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