Here are the characteristics of a bubble:
- Fads, trends or new developments emerge encouraging new investment.
- Rising share prices encourage optimism and expectations of yet higher prices.
- Deregulation and liberalization create new opportunities, particularly in emerging markets.
- Buying sprees are fueled by plentiful credit supply.
- More equity issues are made to satisfy investor demand.
- New types of derivatives make an appearance and margin trading increases.
- Share price rises rapidly overtake bond price increases.
- A common interest in talking up the market is created, stretching from governments to small investors.
- Buoyed by strong performance, fund managers grow more bold and feel more omnipotent.
- News of spectacular profits draws in gullible novice share buyers in great numbers.
- Fund managers and professional investors try to replicate high level of gains by taking bigger and bigger risks.