In financial markets, a bubble occurs when asset prices become disconnected from their intrinsic value due to speculative buying fueled by hype and enthusiasm. This quote illustrates that during such periods, rational individuals begin to question whether the high prices are sustainable. They wonder who is still participating in the market and what could justify such valuations.
The deeper meaning of this statement lies in its commentary on human behavior and economic cycles. It highlights how bubbles form due to a collective belief system driven by herd mentality rather than fundamental analysis. As skepticism grows, it often leads to a realization that asset prices have reached unsustainable levels, triggering a correction as rational investors withdraw from the market. This shift can be sudden and dramatic, leading to a burst of the bubble and potentially causing significant losses for those who held on too long.
Robert J. Shiller is an economist known for his work in behavioral finance and macroeconomics. He is a professor at Yale University and has written influential books such as "Irrational Exuberance," which warned about stock market and housing bubbles well before they burst. His insights into financial markets are widely respected, contributing to the understanding of economic cycles and investor psychology.
