What are Asset Price Bubbles? A Survey on Definitions of Financial Bubbles
Michael Heinrich Baumann, Anja Janischewski

TL;DR
This survey reviews 122 papers to categorize and analyze the various definitions of financial asset price bubbles across disciplines, highlighting the lack of a uniform understanding and the most common approaches.
Contribution
It systematically classifies existing bubble definitions into categories, revealing the diversity and prevalence of different conceptualizations in the literature.
Findings
One dominant definition based on deviation from expected cash flows.
Multiple alternative definitions relying on price properties or fundamental values.
The literature exhibits a non-uniform landscape of bubble concepts.
Abstract
Financial bubbles and crashes have repeatedly caused economic turmoil notably but not only during the 2008 financial crisis. However, both in the popular press as well as scientific publications, the meaning of bubble is sometimes unspecified. Due to the multitude of bubble definitions, we conduct a systematic review with the following questions: What definitions of asset price bubbles exist in the literature? Which definitions are used in which disciplines and how frequently? We develop a system of definition categories and categorize a total of 122 papers from eleven research areas. Our results show that although one definition is indeed prevalent in the literature, the overall definition landscape is not uniform. Next to the mostly used definition as deviation from a present value of expected future cash flows, we identify several other definitions, which rely on price properties or…
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Taxonomy
TopicsFinancial Markets and Investment Strategies · Economic theories and models · Complex Systems and Time Series Analysis
