The term economic bubble refers to a condition where the price of an asset moves into a range that significantly deviates from its fundamental value. Economic bubbles typically occur because of overly optimistic, or unrealistic, investor sentiment.
Also known as a market bubble, an economic bubble is formed when investors hold unrealistic views of an asset's value. Typically associated with a financial market, such as the stock market, the term can also apply to economies, an individual security, or a specific business sector. An economic bubble's lifecycle occurs in two phases: