Some of those
bubbles are created because of intense and excessive speculation on
a new technology or service. The dot-com boom of the late 1990s is
one example. The biotech boom in the 1980s is another. Still other
examples of stock market bubbles include Japanese stocks in the late
-1980s, Nifty 50 stocks in the early 1970s, and Taiwanese stocks in
1987.
A stock market
bubble may set the stage for a later stock market crash, continuing
our example, the Stock Market Crash of 2002.
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Emotional and
cognitive biases (see
behavioural
finance) seem to be the causes of bubbles. But, often, when the
phenomenon appears, pundits try to find a rationale, so as not to be
against the crowd. Thus, sometimes, people will dismiss concerns
about overpriced markets by citing a new economy where the old rules
of investing may no longer apply. This type of thinking helps to
further propagate the bubble whereby every one is investing with the
intent of finding a greater fool.
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South Sea bubble
Behavioural finance
List of stock market crashes
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