How do one know whether an appreciation in the price of an asset is a bubble or not? For example, during the 2007-2008 crisis, there was a housing bubble, which is only mainly agreed upon when the bubble actually starts to burst. Beforehand, however, the rise in housing price was not commonly accepted as a bubble, especially during the period when the housing price was still rising before the crisis.

So how do we know whether an appreciation is a bubble or not?

Any suggestions of articles about the issue are appreciated.

  • $\begingroup$ Some hardcore rational expectations researchers consider multiple equilibria as bubbles. They usually proceed by claiming that thus bubbles do not exist or are even beneficial. $\endgroup$
    – HRSE
    Nov 9, 2015 at 2:41

1 Answer 1


This a highly disputed question! There is a new and interesting paper by Òscar Jordà, Moritz Schularick and Alan M. Taylor about "Leveraged bubbles". They study bubbles in housing and equity markets in 17 countries over the past 140 years.


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