A rational bubble is
A)when everyone behaves optimally and an asset price departs from its fundamental value.
B)when asset prices are entirely explained by fundamental factors.
C)never observed.
D)always temporary.
E)how Robert Shiller explains asset market behaviour.

Question

Quizplus · Accepted Answer

A rational bubble occurs when everyone behaves optimally, meaning they are making rational decisions based on the available information, but the asset price still deviates from its fundamental value. This concept is often used by economist Robert Shiller to explain certain market behaviors.

A Rational Bubble Is