The stock market bubbles will be further explained with the utilization of behavioural explanations. Hence, the major stock bubbles from will be understood in terms of their history, nature and origin. The stock market bubbles will be explained with the utilization of behavioural finance and related theories. In order to ensure that the concepts, stock market bubbles, theories and related elements are appropriately understood, there will be extensive use of the academic literature related to the topic. Latest books, journal articles, reports and reviews will be analysed and discussed to ensure that the findings and evidence are credible, reliable and valuable to this report.
The following report is divided into three different parts, the initial section of the paper will explore the manner in which the stock market bubbles are originated and their history. The second section will focus on the various natures of stock market bubbles and the third section will provide with the behavioural explanations.
Stock market bubble is one of the economic bubble forms which occur within the stock markets. This takes place when the stock prices are driven above the value by the participants of the market in association with certain stock valuation system. It is identified through the literature that the stock market bubbles cause the stock market to crash which is a rapid stock price decline across the stock market. This effect of the stock market bubbles result in considerable paper wealth loss and the external events of economic nature integrates with the crowd behaviour and result in the loop of positive feedback. This suggests that the sales of stock by some of the participants in market drive more participants to sell their stocks from the market.