Bubbleology

Author: Kevin Hassett
Publisher:
Publish Date: 2003-09-01
Features: How are stocks priced? This is a very important question for economists, policymakers, and investors. Kevin Hassett's highly readable book does not dwell on lengthy descriptions of asset pricing research, but instead uses insights from such research to bridge the gap between academic discussions on "bubbles" and public discourse. Additionally, the book's discussion on the impact of uncertainty on stock prices is not only witty but also easy to understand and worth reading. There are only two types of stocks: stocks unaffected by bubbles and stocks affected by bubbles. It is very important to determine whether stock price increases are based on solid fundamentals or on illusory fantasies. Once stock prices rise sharply without reason and then plummet suddenly, a bubble is created. The existence of bubbles is not always bad. For risk-takers, mastering reliable bubble indicators is like grasping a huge business opportunity. Investors are always curious about when and where bubbles will occur so that they can withdraw funds from the market before or early in the bubble formation, thereby acquiring immense wealth.