Spotting Bubbles on the Rise

Mullainathan, S. (2010). Spotting bubbles on the rise: We have the tools to sound the alarm early. Retrieved March 12, 2010 from: http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/detail?vid=1&hid=7&sid=abb23a60-d328-45cf-8382-85d81b846988%40sessionmgr4&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#toc

This article, published in HBR’s Breakthrough Ideas for 2010, discusses the idea of setting up an early warning system that could see a financial bubble as it develops and therefore measures can be taken to minimize or stop it. The author is suggesting that a “bubble committee” be formed and that past data and research in behavioral finance can be used to predict a financial bubble. He further states that the committee would not be able to time when a bubble will burst, only that one exists. Since the market itself is more interested in the timing of a burst, it is important that this initiative be done by the public and not the market. The author states that further research would be needed to make this a reality but with all of the data that is available that it is certainly a viable endeavor. This is an interesting idea that is worth further research because everyone is affected when there is a large market bubble burst such as the one that happen in 2008 and is still being felt in a big way today.