RT Journal Article SR Electronic T1 Asset Bubbles and Market Crises JF The Journal of Investing FD Institutional Investor Journals SP 6 OP 22 DO 10.3905/JOI.2009.18.4.006 VO 18 IS 4 A1 James H Norman A1 S. Ramu Thiagarajan YR 2009 UL https://pm-research.com/content/18/4/6.abstract AB Asset bubbles—characterized by investment booms, euphoria, and then panic—have been a feature of the financial landscape for centuries. They have become more frequent in recent times as global wealth, the variety of assets being traded, and the mobility and velocity of capital have increased. Although the asset classes involved have changed over time, many of the key drivers and characteristics of bubbles remain the same. And yet markets appear to remain highly susceptible to them—indeed, much of the blame for the current crisis has been put on the bubble in housing. This article explains why asset bubbles occur and what investors can learn from them. It first examines how asset bubbles are formed and why it is critical that investors understand them. Next it examines the economic reasons for the inter-temporal increase in asset bubbles. In the third section, the authors conduct an empirical experiment to evaluate if they can predict asset bubbles, using the technology bubble as an example. The following section discusses the impact of bubbles on both active and passive equity investment strategies. The article concludes with some insights into how both active and passive strategies should be conditioned to address the perverse effects of asset bubbles.TOPICS: Security analysis and valuation, equity portfolio management, fixed-income portfolio management