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Finding a theory to explain asset bubbles

Extrapolative expectations might be the answer to many of the world's financial and economic puzzles.

UP IN THE AIR: Despite decades of research, finance academics have been unable to agree on a cause for this phenomenon.

DWELLING ON IT: People might decide how much a house is worth by guessing how much people will want to live in the area in the future.

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...

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