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Asset Price Bubbles: A Survey

43 Pages Posted: 28 Mar 2011 Last revised: 3 Feb 2013

Anna Scherbina

University of California, Davis - Graduate School of Management

Bernd Schlusche

Board of Governors of the Federal Reserve System

Date Written: December 13, 2011

Abstract

Why do asset price bubbles continue to appear in various markets? What types of events give rise to bubbles and why do arbitrage forces fail to quickly burst them? Do bubbles have real economic consequences and should policy makers do more to prevent them? This paper provides an overview of recent literature on bubbles, with significant attention given to behavioral models and rational models with frictions. The latest U.S. housing bubble is described in the context of this literature.

Keywords: Bubbles, Limits to Arbitrage, Financial Crisis

JEL Classification: G00, G01, G10

Suggested Citation

Scherbina, Anna and Schlusche, Bernd, Asset Price Bubbles: A Survey (December 13, 2011). Available at SSRN: https://ssrn.com/abstract=1793420 or http://dx.doi.org/10.2139/ssrn.1793420

Anna D. Scherbina (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
(530) 754-8076 (Phone)
(530) 752-2924 (Fax)

Bernd Schlusche

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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