Explore commonly used personal finance terms.
An asset bubble occurs when the price of an asset, such as stocks or real estate, rises significantly above its fundamental value due to high demand, speculation, or market excitement. When a bubble bursts, prices often plummet, leading to substantial financial losses. The 2008 housing crisis is an example of an asset bubble, where excessive demand and speculative investment drove up housing prices until the market crashed. Recognizing asset bubbles can be difficult but is crucial for investors seeking to avoid overvalued markets.
