Financial Bubbles (Burbujas Financieras)

1. Introduction
First we need to start giving some definitions of financial bubbles:
* A surge in the market caused by speculation regarding a commodity which results in an explosion of activityin that market segment causing vastly overinflated prices. The prices are not sustainable and the bubble is usually followed by a crash in prices in the affected sector.

* An economy market inwhich prices for goods and services rise far above actual values. This trend continues until investors realize just how far prices have risen, usually but not always resulting in a sharp decline.Bubbles usually occur when investors, for any number of reasons, believe that demand in the economy will continue to rise far beyond what is sustainable. This results in the increased prices.

*Booming economic activity before crash.

* An unstable boom based on speculation in any market, often followed by a financial crash.

An economic bubble (sometimes referred to as a speculativebubble, a market bubble, a price bubble, a financial bubble, a speculative mania or a balloon) is "trade in high volumes at prices that are considerably at variance with intrinsic values".It could also bedescribed as a trade in products or assets with inflated values.
While some economists deny that bubbles occur, the cause of bubbles remains a challenge to those who are convinced that asset pricesoften deviate strongly from intrinsic values.
While many explanations have been suggested, it has been recently shown that bubbles appear even without uncertainty, speculation, or boundedrationality. It has also been suggested that bubbles might ultimately be caused by processes of price coordination or emerging social norms.
Because it is often difficult to observe intrinsic values inreal-life markets, bubbles are often conclusively identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst. Both the boom and the burst phases...