, Columnist
A Better Theory to Explain Financial Bubbles
The past is no guarantee of future performance. But investors act as if it is.
It's art, you know.
Photographer: Joe Klamar/afp/getty imagesThis article is for subscribers only.
What causes asset bubbles? This question is the great white whale of finance theory. We know that asset prices are given to spectacular rises and falls over short periods of time. Answering this question is hugely important, not just for people’s pensions and retirement, but for the whole economy, since crashes in asset prices can leave growth in the doldrums for years.
QuickTake Watching for Bubbles