Bubbles

Question 1

Definition of Bubbles

Answer 1

Sir Isaac Newton,1720

I have learned to predict the movement of celestial bodies but not of man in markets

Question 2

First phase of bubble

Answer 2

Stealth phase- taking off

Question 3

Second phase of bubble

Answer 3

Awareness- investors catching off

Question 4

3rd phase

Answer 4

Mania phase- rapid growth, frantic buying

Question 5

Last phase of a bubble

Answer 5

Blow off phase- fear, drop in price

Question 6

Tulip Mania dates

Answer 6

1634-1637

Mackay’s account 1841, most highly regarded

Question 7

Tulip mania location

Answer 7

Holland

Question 8

Tulip mania supply

Answer 8

112 per mother bulb

Question 9

Where traded?

Answer 9

Taverns

Question 10

Market for rare tulips spilled into common in…

Answer 10

1636

Question 11

Prices surged by

Answer 11

3x the price in 3 years

Question 12

Crashed

Answer 12

1637- trading shut down by the government

Question 13

Garber

Answer 13

1989- not obvious madness, acting rationally purchasing rare bulbs- madness purchasing common at high price

Question 14

Tradesman known to pay how much of his fortune for one bulb?

Answer 14

Half his fortune

Question 15

Distress when market crashed

Answer 15

Masses had Bought them and liquidised property- in poverty

Question 16

Behavioural finance view of bubbles

Answer 16

Bubbles are rational- people don’t behave with full rationality- traditional economics- know bubble is developing but style want to get increasing returns - explains why bubbles keep happening

Question 17

Bubble phases=

Answer 17

Minsky model