Throughout history, financial markets have experienced bubbles and crashes. Understanding the cause of bubbles can provide important insights for authorities and investors.

1. Explain why bubbles occur in financial markets. Your explanation should describe how different trader-types influence bubble formation. 
2. Briefly discuss how 'overconfidence' contributes to financial market bubbles. 
3. Provide an example of a 'real-world' financial market bubble and provide a short explanation as to what caused it to 'crash'.  

Answer rating: 100% (QA)

Financial market bubbles occur when the prices of assets such as stocks or real estate become disconnected from their intrinsic values driven by specu... View the full answer