Speculative Bubbles: Difference between revisions
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===The Tulip-Bulb Craze-Holland early 1600's=== | ===The Tulip-Bulb Craze-Holland early 1600's=== | ||
* The Dutch became fanatical about tulips after a non-fatal virus that caused the tulip petals to develop contrasting colored stripes. The more unique a bulb was the greater the value. The more expensive the bulbs became, the more people viewed bulbs as a smart investment. Everyone got caught up in tulip-mania: nobles, citizens, farmers, mechanics, seamen, footmen, maid-servants, and chimney sweeps speculated in tulip bulbs. Skeptics existed that thought prices couldn't possibly go higher only to watch their friends make enormous profits. Many of these skeptics were eventually sucked in. Eventually prices got so high that some people decided to sell their tulips. During January 1637 prices increased by twentyfold the following month prices declined by an even greater amount. The bubble had burst. Prices eventually fell to no more than the price of a common onion. | * The Dutch became fanatical about tulips after a non-fatal virus that caused the tulip petals to develop contrasting colored stripes. The more unique a bulb was the greater the value. The more expensive the bulbs became, the more people viewed bulbs as a smart investment. Everyone got caught up in tulip-mania: nobles, citizens, farmers, mechanics, seamen, footmen, maid-servants, and chimney sweeps speculated in tulip bulbs. Skeptics existed that thought prices couldn't possibly go higher only to watch their friends make enormous profits. Many of these skeptics were eventually sucked in. Eventually prices got so high that some people decided to sell their tulips. During January 1637 prices increased by twentyfold the following month prices declined by an even greater amount. The bubble had burst. Prices eventually fell to no more than the price of a common onion. | ||
[[Image:Tulip00.jpg]] | [[Image:Tulip00.jpg]] [[Image:tulipomania.jpg]] | ||
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[[Random Walk]] | [[Efficient-Market Hypothesis]] | [[Fundamental Analysis]] | [[Technical Analysis]] | [[Non-Random Walk Theory]] | [[Market Efficiency vs. Behavioral Finance]] | [[Random Walk]] | [[Efficient-Market Hypothesis]] | [[Fundamental Analysis]] | [[Technical Analysis]] | [[Non-Random Walk Theory]] | [[Market Efficiency vs. Behavioral Finance]] | ||
Revision as of 02:18, 1 May 2007
Res tantum valet quantum vendi potest
- translation- A thing is worth only what someone else will pay for it
Speculative Bubble - the only reason the price is high is because investors believe they can sell it for a high price tomorrow. Fundamental factors do not justify such a high price.
Although the castle-in-the-air theory can explain speculative binges outguessing the reactions of a crowd is difficult and dangerous.
"In crowds it is stupidity not mother-wit that is accumulated"
The Tulip-Bulb Craze-Holland early 1600's
- The Dutch became fanatical about tulips after a non-fatal virus that caused the tulip petals to develop contrasting colored stripes. The more unique a bulb was the greater the value. The more expensive the bulbs became, the more people viewed bulbs as a smart investment. Everyone got caught up in tulip-mania: nobles, citizens, farmers, mechanics, seamen, footmen, maid-servants, and chimney sweeps speculated in tulip bulbs. Skeptics existed that thought prices couldn't possibly go higher only to watch their friends make enormous profits. Many of these skeptics were eventually sucked in. Eventually prices got so high that some people decided to sell their tulips. During January 1637 prices increased by twentyfold the following month prices declined by an even greater amount. The bubble had burst. Prices eventually fell to no more than the price of a common onion.
Random Walk | Efficient-Market Hypothesis | Fundamental Analysis | Technical Analysis | Non-Random Walk Theory | Market Efficiency vs. Behavioral Finance
