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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
A market condition where asset prices become disconnected from underlying value — driven mostly by narrative and the expectation that someone else will pay more tomorrow, rather than by earnings, cash flow, or fundamentals.
Why It Matters
Knowing the actual definition of a bubble is the first filter for which market warnings to take seriously. "Stocks went up a lot" isn't a bubble. Prices sustained by narrative rather than by earnings or cash flow is. The dot-com era and 1929 are the canonical examples; whether AI in 2026 qualifies is one of the most-debated questions on Wall Street.
Key Points
- A bubble is about *why* prices are rising (narrative-driven, not fundamentals-driven), not just *how much*.
- Economist Hyman Minsky described five stages: displacement, boom, euphoria, distress, revulsion.
- Bubbles are obvious in hindsight; in real time, even very smart investors disagree about whether one is forming.
Related Terms
Common Questions
A market condition where asset prices become disconnected from underlying value — driven mostly by narrative and the expectation that someone else will pay more tomorrow, rather than by earnings, cash flow, or fundamentals. Knowing the actual definition of a bubble is the first filter for which market warnings to take seriously. "Stocks went up a lot" isn't a bubble.
Knowing the actual definition of a bubble is the first filter for which market warnings to take seriously. "Stocks went up a lot" isn't a bubble. Prices sustained by narrative rather than by earnings or cash flow is. The dot-com era and 1929 are the canonical examples; whether AI in 2026 qualifies is one of the most-debated questions on Wall Street.
A bubble is about *why* prices are rising (narrative-driven, not fundamentals-driven), not just *how much*.
Economist Hyman Minsky described five stages: displacement, boom, euphoria, distress, revulsion.
Bubbles are obvious in hindsight; in real time, even very smart investors disagree about whether one is forming.