Toward a Theory of Bubble Psychology: Current Approaches and a Consumer-Level Explanation

Abstract

The rise and fall of investment markets is not a new story. Spilling across time from rampant speculation on tulip bulbs in 17th century Holland to the recent collapse of the US housing market starting in 2007, it has been quipped that “speculation and bubbles are eternal, only the object varies” (Lybeck 2011, p. 122). Still, the rapid ascension and precipitous fall of investment markets can be a catastrophic force with enormous societal consequences and costs.