An asset bubble is often easier to perceive after it has deflated.
Features of an asset bubble:
(1) The valuations are excessive.
(2) There is disconnect between prices and the underlying economic fundamentals.
(3) High levels of debt are used in the purchases (highly leveraged).
(4) Retail investors are aggressively involved.
Factors that may contribute to an asset bubble:
(1) People believe that something is new and that the old rules no longer apply.
(2) Other reasons to deny risk.
(2) There is a some degree of group mania.
(3) Someone may have cornered the market and is attempting to "pump and dump".
