Why are they consistently switching between plural and singular

and also, what is the difference between these and the bubble component?

A serious question. Below is the paper by Blanchard and Watson (1982)


Please any help would be appreciated. Desperate situation.


My thoughts:

When the bubble component is positive, the bubble component is called a bubble (or a rational bubble)

When the bubble component turns positive from zero, we say, a bubble has formed, the bubble component turns zero from positive, we say, the bubble has popped. If we have multiple scenarios like this, then, we could say bubbles.


1 Answer 1


The bubble component refers to the deviation of the price of an asset from its fundamental value, that is, the value that would be expected based on economic fundamentals such as earnings or dividends.

Bubbles, on the other hand, refer to situations where the bubble component is driven by self-fulfilling expectations of future price increases, also known as speculative demand. In other words, bubbles are when the bubble component is driven by people's belief that the price of an asset will continue to rise, rather than by any underlying economic fundamentals.

A Bubble is a specific instance of a bubble, where bubble component is driven by speculative demand and the price of an asset is significantly deviating from its fundamental value and is expected to burst, resulting in a sharp decline in the price of the asset.

The difference is that a bubble component is a deviation from fundamental value, bubbles are a situation where the deviation is driven by speculative demand and a bubble is a specific example of a bubble situation where the deviation is driven by speculative demand and the price is expected to burst.

  • $\begingroup$ Thank you for your feedback! I was thinking that...but it seems like not a lot of rational bubble theorist use the word "situation" to describe a bubble but rather a "positive deviation or deviation from the fundamental value" to describe a bubble. I will upvote once I have a little bit more replies. Thank you again Timmetje! $\endgroup$
    – EHMJ
    Commented Jan 16, 2023 at 18:11

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