(plural speculative bubbles)
- Earlier uses of the term bubble to describe financial speculation can also be found, as in:
- circa 1820, Washington Irving, "The Great Mississippi Bubble" in The Crayon Papers:
- Every one now talks in thousands; nothing is heard but gigantic operations in trade. . . . speculation rises on speculation; bubble rises on bubble.
speculative bubble - Investment & Finance Definition
A rapid but often short-lived run-up in prices that is caused by irrational exuberance, rather than the basic underlying fundamentals of the market. As the speculative bubble increases, more investors are likely to buy, until it appears that “everyone” believes prices will rise further. When the bubble finally bursts, prices fall even faster than they rose, with everyone rushing to sell at the same time, which produces widespread and severe losses. Tulipmania in Europe during the 1630s and the run-up in Internet stocks in the late 1990s are examples of speculative bubbles.