Jarrow On Predicting Asset Bubbles

In, How to Detect an Asset Bubble, Robert Jarrow, Younes Kchia and Philip Protter describe the method by which asset bubbles can be deduced from the asymptotic behavior of prices.

I can just about follow the reasoning, and it make sense – although they don’t explain WHY it makes sense as a series of incentives and actions – which an Austrian would require.

And I while I appreciate their work, I’m struck the the fact that, at least for me, asset bubbles are so easy to detect that it’s ridiculous: The old adage that if your gas station attendant or your school teacher is concerned about it then it’s ready to pop, and you should sell.

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