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Ep25 “Bubble Trouble” with Will Goetzmann

All Else Equal: Making Better Decisions

00:00

Introduction

Jules van Binsburg: What do you think a bubble is? Jonathan Burke: People routinely define bubbles when they notice that the price grows up by a lot, but then drops by a lot. The price of an asset which cat flows occur very, very long in the future is extremely sensitive to very small changes in either the growth rate or the discount rate for those cash flows. And so the price could be driven up because people were optimistic and driven down because they were pessimistic.

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