Standard Deviations with Dr. Daniel Crosby Understanding the Shape of Financial Bubbles: Key Patterns and Indicators
Apr 9, 2018
Explore the captivating world of financial bubbles and discover how they form and persist. Uncover psychological factors driving market behavior and the responsibilities of investors to avoid panic. Dive into key indicators that signal a bubble, including asset spikes and the power of media narratives. Learn how storytelling can influence bubbles and their unpredictable nature. Lastly, navigate the complexities of investor psychology and the importance of a balanced approach amid market fluctuations.
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Name Changes Fuel Irrational Runs
- A tea company and others spiked after linking to cryptocurrency, echoing past mania where name changes drove huge gains.
- Manatech's IPO jumped 368% despite selling laxatives, showing stories trump fundamentals in booms.
Bubbles Emerge Even In Controlled Markets
- Experiments show bubbles form even with known fundamentals and finite horizons, revealing deep behavioral roots.
- Bubbles reappear under changed valuations even for experienced traders, so they are robust to market rules.
Use Shiller's Checklist To Spot Bubbles
- Use Robert Shiller's checklist to diagnose bubbles by asking targeted questions about price, media, and lending.
- Apply the checklist to asset classes you follow to form a structured view rather than emotional judgments.
