A Note On Housing Bubble

A Note On Housing Bubble
Housing Bubble Introduction This nearest housing boom happened in approximately 1998, until 2006. There has been belief that central bank affect
on short–term interest rates helped to stimulate the booms. Mortgage interest rates were almost at historical lows. During the eight–year duration,
households experienced money increases from both stock market increases and house price appreciation of unprecedented fractions. Maybe most
damaging were assumption that this boom could continue(Baker, D,2008). Consequently, consumers went on spending sprees, based on increasingly
real and perceived home stock values, similar as stock market increases. The fashion attitudes of "the big one is the better one," or "as lone as one can
afford," or "avoid higher prices in future" became the main forces for house buyers. Finally, purchasing a house became sections of planning for
retirement. Owning a house became a way to aid for retirement and enjoy the investment. As a result, many consumers mentioned the appreciation in
their houses as a future sources of retirement funds. Even if the rapid downturn in stock markets from their lofty heights in about 2001 did not dispute
the housing market.(Baker, D,2005) Definition Housing bubbles might occur in local or international housing markets. In their late stages, they are
characterized by quickly increases in the valuations of property until unsustainable levels may relative to incomes, price to rent ratios, and other
economic factors of
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ChinaвЂ™s Real-Estate Bubble Essay
China's Real–Estate Bubble
China is one of the major economical players in today's international market. China's economy is the "seconds largest in the world after the United
States" (Joseph, 63). This is a striking achievement due to fact that China is a "developing country". China has achieved a great amount of success
through the collaboration of political and economical regimes. The economical growth in China led to "one of the biggest improvements in human
welfare anywhere at anytime" (Kristof, 15). Currently, China is experiencing a real–estate bubble. This eventually will hit a climax, disrupting the
real–estate market within China. This real estate bubble that China is undergoing is considered one of the "biggest housing ... Show more content on
Helpwriting.net ...
In an attempt to stimulate the economy Chinese authorities allowed a stimulus package dealing with the real–estate sector of the economy. Chinas
massive monetary stimulus package seems to "risks triggering large asset–price increases, a housing bubble, and bad debts from the financing of
local–government projects" (Leung, China Must Pare Stimulus). According to Barclays China has four factors supporting its property growth "strong
income growth, urbanization, home upgrading and favorable demographic change, limited investment alternatives, households' strong balance sheets".
This provides a good base to withstand the real–estate bubble's burst.
Today globalization has an impact on all nations. China is a nation that many rely heavily on. This shows an importance with the economical welfare
of China. If China has a downturn in its economy other nations are impacted as well. China contributed "19% of the world's economic growth in
2010, and that's expected to increase to 24% this year" (Miller, What If the China Bubble Bursts?). This depicts the impact that china could have on
the economical growth of the world. Due to the economical situations within the United States and Europe, China's growing strength is essential for
the recovery of U.S. and Europe. A major issue is "if Chinese land prices plummet, there will be less demand for raw materials and a steep decline in
world commodity markets and

Filter Bubble Research Paper
Rebecca Pascual
Gen 103 week5 discussion 1
http://www.easybib.com/v2/mla8/website–citation/www.businessinsider.com/have–you–been–trapped–in–the–filter–bubble...
. What were my initial thoughts on the filter bubble after watching Ted Talk.?
After listening to Ted talk on the filterbubble. It's not surprising to me, But in a peculiar way, it was kind of shocking.
That it is opened my eyes to what's really going on in our technical world. But it also touches me on Another level on how I can be so unaware of
what is really going on a matter of fact I don't even know what I was thinking in the first place after all of this I thought I was in control when I
brought up Google and I search for a particular thing but I guess not my search goes ... Show more content on Helpwriting.net ...
What are the positive and negative effects of the filter bubble, particularly in relation to ethical issues that may arise https:/
/blogs.commons.georgetown.edu/idst–325–spring2015/ The positive effects of a filter bubble
The filter bubble was designed to navigate our personal and recreational on how are using the web.
It's a passport on how you see the world. But it also controls the user on what needs to be seen and their search Pool. So maybe it increases the
amount of time that you spend on the Internet since it literally does your thinking for you I'm not sure but now I'm aware of so I will wait out this
matter. If I was to be asked this question may be a few months down the road I could probably give more thought on all of this because now my eyes
have been opened so we'll see.
.Can the filter bubble and pack online for my final paper and Annotated biography.?
Well when it comes time to writing this paper this week I may or may not get the accurate information that I need to get I don't know we'll see. It may
just give me what the algorithmic would suggest that I might want to see. So I will have to Decipher what is liable and I'm liable information.
. Three suggestions for popping your Internet filter bubble did you select explain why you chose these

The US Housing Market Bubble
When researching past economic recoveries, the housing market is the one to drive the economy out of recession. That being said, this economic
recession hasn't had much of an impact until recently. America's housing boom had a tremendous influence on the economy for its low prices and flow
of new home construction.
The new construction market in the mid 2000's was flourishing. People saw building a home as an opportunity for a solid investment because prices
and rates were so low that certain homes could depreciate extremely slowly. However, there would be a negative effect from all this low–cost new
construction and few were aware of just how devastating it would be to the new construction market.
In 2005, the market was flooded with a vast array of homes that were all selling at a low price, and this allowed people to buy and sell homes with
minimal effort. Banks were being reckless with their lending, not giving enough attention to who they were giving mortgages to, as virtually anybody
with a decent credit score could go to a bank and get a mortgage, sometimes without even going to see if the land and ability for development was
there. This created a housing bubble in 2006, and would inevitably come back to hurt a wide range of industries, but few were as damaged as the new
construction industry.
Once things started to get bad, they got really bad for a lot of families who were given mortgages, who were not properly qualified. There was a major
spike in defaults, with

Major Events From 1980 : 2005 Cause An Economic Bubble
Introduction The research question in this essay is "To what extent have major events from 1980 – 2005 cause an economic bubble, in turn either
appreciating or depreciating the American stock Market?"
There are countless number of factors that cause a stock market as a whole to crash, but three main reasons. There have been numerous financial
"crashes" throughout history that date back to the 1600's when stock exchanges were first evolving with the trade economies of Europe. A crash
represents a steep, sudden decline in the value of market prices, and can often lead to and economic depression. There are 3 main types of crashes that
occur frequently in today's market, Investment bubbles, Spooks, and HTF. An economic boom on the other hand quickly helps appreciate stock prices,
as the companies' market capitalization and earnings will go up. The most devastating crashes are usually a result of an overly–inflated market, also
known as a "bubble." Investment bubble occur when prices of market shares are driven upwards past there actual value. A bubble is encouraged by a
"herd mentality," where people first jump on a bandwagon of a profitable stock, and then, when the bubble bursts, they engage in panic selling. The
most famous example of this was during the 1929 American stock market crash, following the WW1. Also Stock markets can also be "Spooked" into
a decline or a catastrophic event. For example, San Francisco's massive earthquake in 1906, played an integral role in the

The Role In Inflating The Housing Bubble
Role in Inflating the Housing Bubble
The 2008 financial crisis was the most serve crisis seen since the Great Depression (Duca). There were a number of factors that contributed to inflating
the housing bubble, in which it collapsed under its own weight (Duca).
The source that lead to inflation began in 2000, with the funding of subprime mortgages or mortgages for individuals who had too low of credit and no
down payment, with private–label mortgage–backed securities (Duca). This was done because subprime mortgages are more risky, so these securities
would absorb that risk (Duca). The result of this process was that more individuals bought homes (Duca). In competitive markets when more individuals
qualified for a loan, the demand for housing

Monetary Policy And The Housing Bubble Analysis
Anyone that was living in America, or even watching from abroad, knows that in 2008 America had a huge collapse of the housing market. Homes
were foreclosed on in record numbers causing the real estate balloon to burst. But the collapse did not happen overnight and in many ways was
destined to happen. According to Investopedia.com in order to attract buyers and sell houses, mortgages were offered to less than qualified applicants.
Then just a few years before the collapse subprime mortgages made up 20% of the market. (Investopedia.com) Factors such as the 1993 passage of the
North American Free Trade Agreement (NAFTA) and the 9
–11 terrorist attacks led to an increase in unemployment. With unemployment numbers
climbing many homeowners... Show more content on Helpwriting.net ...
Dokko, Doyle, Kiley et all shows graphs of how the housing market climbed from 1974– 2001 with small periods of dips in the housing market.
Housing prices began and all–time record climb points above the nominal house price. The inflation of house prices, increasing interest rates, and ease
of access to mortgages set America on a course for disaster in the housing market. Though in most areas of the country the housing market has
rebounded even creating another balloon in the real estate market. Many lessons were taught with the collapse of the housing market. Having
purchased my first home in 2015, I found out how selective mortgage lenders are now with providing mortgage loans. The lowering of the interest rate
and the increase in employment has help stabilize the economy and revived the housing market. Dokko, Doyle, Kiley et all validated that America
strayed too far away from the Thomas Rule when issuing interest rates and when valuing properties.

Bubbles
I once had a pet fish and I named him Bubbles. Bubbles was my very first fish and I have some very fond memories of him. My first memory of
Bubbles was when I got him at the store. The day I went to the store I remember walking up to the fish tank and picking out which fish I wanted. I
decided to pick the smallest one because I wanted to see how much he could grow. I told my dad, " I want the smallest one!" The pet store owner
caught the smallest one and put him into a plastic bag. Me and my brother Dillon were very excited because it was our very fish. We took him
home and put him in the new fish tank that we bought. Dillon and I were in such awe of the fish that we sat for hours just staring at the fish swim
around. My dad told us, "Although that fish may be small now it will grow to be big someday!" From that day forward we watched Bubbles as he
grew and grew becoming bigger each day we fed him. A few weeks after we got Bubbles me and my brother decided that we wanted Bubbles to have a
friend. We saw the Bubbles looked lonely so we wanted him to have a friend to swim around with so we asked Dad if we could get another fish.... Show
more content on Helpwriting.net ...
The fish was nothing different from what Bubbles was when we first got him. We named him Darwin, after a fish we saw in a T.V. show. As me and
Dillon got older we saw how much our fish grew from being as small as a paperclip to the size of a

Essay about The Chinese Bubble
Agenda
1. Introduction ............................................................................................................................ 2
2. The Chinese Property Market................................................................................................. 3
3. Chinese Housing Bubble 2005–2011...................................................................................... 3
4. Development of Ghost Cities ................................................................................................. 5
5. Current Situation of the Housing Market ............................................................................... 8
6. Conclusion ... Show more content on Helpwriting.net ...
As China measures its GDP in what is built, unlike the US, which measures what is bought and sold, high GDP targets pressure China's property
market (Editors, 2013). To reach GDP targets, party officials were evaluated on their contribution to the GDP growth. This put local governments under
pressure and encouraged overinvestment and rising housing prices (Guilford, 2013). Overinvestment in the housing market lead to increase of property
building, which in turn lead to job creation but also the development of plenty of uninhabited cities. The reason for those cities remaining empty is the
great inefficiency in China's housing market. In the metropolises of China, housing prices are very high and for the most people just not affordable.
According to a study by Credit
Suisse (Figure 5) the top five most expensive cities, measured by the IMF house price to wage ratio, are located in China, Beijing being the most
expensive. This creates huge disparities in
China's society, as on the one hand people can barely afford space to live and have to share rooms with several people in the Hutongs, whereas plenty
apartments remain unoccupied, as their rental or selling prices are too high for the average Chinese citizen.
3. Chinese Housing Bubble 2005–2011
In the years 2005 until 2011, the housing prices have risen tremendously in the Chinese real estate market (Figure 3).

The Massive Financial Loss Due to the Dot-Com Bubble Crash...
In the beginning, the Internet was created by the military in 1958 for their own personal purposes. They had no idea how many people would be
interested in the Internet, nor how much the Internet could grow into what it is today. The Internet as we know it today did not come about until 1995.
Now, it is said that approximately one third of the world's population uses the Internet, and it is still growing. The dot–com bubble spanned from 1995
to 2000 and involved the entire world. The Internet caused an unprecedented growth and speed in business because of how accessible it was to
everyone. Many people wanted to become involved because they saw how fast it was growing. One company that made it possible for so many
participants to invest was... Show more content on Helpwriting.net ...
The collapse has been recorded as the single greatest loss in the history of the Internet stock market, with a groundbreaking two–thirds deficit.
Surprisingly, the cause of the crash was because of the companies themselves. Companies began to report major losses in revenue because of the
"Get Big Fast" mentality. This caused doubt to set in, and people quickly stopped investing. Market value dropped by five trillion dollars, and most
companies had to close shop. Andrew Beattie stated that from March 11th, 2000 to October 9th, 2002 the NASDAQ loss compiled to a whopping
78% of value. Soon after the initial fall of NASDAQ came September 11th. People had already lost a lot of their faith in the industry, and the
national crisis of 9/11 only added to the crash. People were focused on the catastrophe of 9/11, and it proved to be the last nail in the coffin for the
stock market. People were no longer investing.
"Many argue that the dotcom boom and bust was a case of too much too fast. Companies that couldn't decide on their corporate creed were given
millions of dollars and told to grow to Microsoft size by tomorrow" – Andrew Beattie.
Aspects of growth–
While many were angry about the dot–com bust, others were grateful. While the crash left many people out of jobs and in debt, the boom proved to
be overall helpful. Because of the speed at which technology was progressing it can be argued that the loss was worth the gains.

Thought Bubble Content Analysis
Introduction
I chose to do my multi genre project on the Twenties. The Twenties have also interested me and that unit was by far my favorite this semester, so it
only seemed right to go deeper into and expand my learning on it even more. To portray the different changes and new inventions that came about
during this era, I did a drawing. In my drawing, there is a young flapper girl and a large thought bubble. Inside this bubble, it shows her reflecting on
what has happened during the past ten years.
Thought Bubble Content Explanation
Many important milestones such as Prohibition (the 18th amendment), Women's Suffrage (the 19th amendment), and theStock Market Crash in 1929. I
chose to portray Prohibition by having a beer bottle tipped over ... Show more content on Helpwriting.net ...
To start with, the Flapper girl (in the lower left corner) was a major iconic figure during this period. Flappers were women who went against the
normality and did not so "lady like" things. Many of them did this as self expression and to get there point across. Others did this to join the
movement and be rebellious. Across the top of the paper, there is a border that looks like an old film reel that is unraveled and the tape is out. This
movie reel tape is supposed to represent the increase and popularity found in movies and acting. It was a form of entertainment, as well as a hobby
for some. Also to go along with the theme of acting and movies, in the title, the "20's" is red like a stage curtain and has yellow circles which are
meant to look like dressing room lights. Another hint about the title, is that to show the main focus and topic of the drawing. It is also in bold/ fun
colors because that's exactly what the Roaring 20's were; bold and

The Effect Of Bubbles And How They Affect Investment
2. The definition of bubbles and how they affect investment This section will focus on the analysis about how bubbles affect investors' behaviors.
Since bubbles are closely connected with crises, doing research on investors' behaviors about overvalued assets can help economists to understand
crises' fundamental. Therefore it is good for governments to take actions to prevent these crises. The first part of this section will describe the
definition of "bubbles" in detail, and the second part will illustrate relevant empirical evidences to further explain how bubbles affect investing
behaviors. 2.1 Theoretical research C. Kindleberger (1978) first defined "bubbles" as a continuously increasing process of assets' price. This
phenomenon... Show more content on Helpwriting.net ...
Finally he found investors' behaviors in terms of the overvalued assets played an important role in this process. Joesph E. Stiglitz (1990) agreed with
the theory above, and suggested that if investors thought assets could be sold over their expectation, they would do more investment, and then assets'
actual price would increase, which also means the bubbles would appearance. He thought it is important to prove the existence of bubbles, since they
can implicate the future decrease of assets' price. Therefore governments could take actions to control investors' behaviors and avoid crises. But by
taking the 1960s crisis as an example, he found bubbles' existence was difficult to test. It is because bubbles would not exist only if the assets' discount
rate increased equal to the assets' price, which means the assets' value would be equal to the discount value. But this equilibrium is not expectable.
Then Stiglitz proposed that the markets might have multiple equilibriums, so he collected many economists' thoughts about this opinion. But he found
models of different economists were developed in terms of different methods, so they cannot reach an agreement. But he suggested that it is still
important for economists to analyze this problem in further studies. Basing on the research of other economists, Robert S. Chirinko and Huntley
Schaller finally built a widely accepted model, Q equation, to test bubbles' existence. The

Real Estate Bubble in China
Real Estate Bubble in China: the Present and the Future
2011 Q3
HA _S28
0102883578
Introduction:
The concern over whether China is experiencing a real estate bubble has increased, especially after Dubai crisis happened. The construction area of
both residential and commercial properties has increased by almost 6 times since year of 2000.
China has enjoyed a sharp increase in property price since 2006. Especially, after 2009, due to the large stimulus package, majority of the money went
to construction and real estate industry. It further pushed up the property price, leading to a lot families became the "slave of the property" who were
struggled to pay the mortgage. Not only the high price has affected most people's lives in ... Show more content on Helpwriting.net ...
This has been interpreted as a sign of over investment and real estate bubble. In the case, the apartments have all been sold out, even though nobody
moves in. because most people believe that property will grow definitely. For investment purpose, most of them prefer to buy one. This kind of
behavior has contributed to the high vacancy rate in China,
High Vacancy Rate: since official data are not reliable, the concrete number of vacancy rate is not available from official sources. The reason for this
has been that government officials said that, they don 't know what vacancy rate means. Obviously, government is trying to avoid knowing the fact.
Somehow, people have provided a rough estimate on the vacancy rate. They are using how many electric meters that have no readings for 6 months as
an indicator of vacancy rate. Overall, we got a number of 65.4 million apartments. It is estimated that the vacancy rate is as high as 36%.
With such a high vacancy rate, people are wondering how large the real estate bubble in China will be. James S. Chanos, one of the first foresee the
collapse of Enron and earn large profit from hedge fund, gave the answer, it will be Dubai times 1000. A growing number of economists and hedge
funds managers have been believed that Chinese economy is a big bubble. Others argue that China is definitely not a bubble, the development is real.
There is overheating in some area, but infrastructure construction is still necessary to a

The Pros And Cons Of The Bubble Act
Part III: The Bubble Act and How It Kick–Started the South Sea Bubble
It would make sense, given the series of events leading to the Bubble Act of 1720, that Aislabie felt it would help the South Sea scheme. However, the
missing piece of the South Sea Bubble is Robert Walpole. In 1720, Lady Cowper, in her diary, noted that the king needed В
Ј600,000 to pay off the
"Debts of the Civil List." She noted that because, in the winter of 1720, Walpole did not win the contract to take on the public debt for the Bank of
England, his consolation prize was to get his way on how the ВЈ600,000 would be paid off. At the time, the South Sea Company did not hold the
contract to take on this particular ВЈ600,000. Walpole decided that the two marine insurance companies, ... Show more content on Helpwriting.net ...
The result was overwhelmingly positive for the South Sea Company; its stock price shot up from ВЈ610 to ВЈ870 in two days. None of this would have
likely happened had Walpole not financed the debt through the Bubble Act of 1720. Whatever his motives in opposition of the South Sea Company
had been, his financial dealings with the two marine insurance companies allowed the company to grow nearly 50% in only two days. Effectively,
Walpole sped up the formation of the South Sea Bubble, inflating it even faster than it had before. The South Sea Company tried to artificially grow
on its own terms. By being forced to provide an unlimited loan, it no longer had any negotiating power, since it had already extended unlimited credit.
Walpole may not have immediately suppressed the South Sea Company as he had hoped to do, but nevertheless, he strategically put the South Sea
Company in a poor leveraging

Causes And Consequences Of The Housing Bubble
A combination of factors in the early 2000 's caused the perfect economic storm to trigger the worst recession the United States had experienced since
the Great Depression of the 1930 's. The "housing bubble" and subsequent burst left homeowners owing more on their mortgages than the property was
worth and fueled the financial crisis of 2007–2009. Many economists label the housing bubble as the single largest contributing factor to the financial
crisis. Caused by low–interest rates, relaxed standards on lending and the misguided belief that prices and the value of homes would continue to
rise, the US economy is still recovering from the effects of the housing bubble. To understand the causes and consequences of the housing bubble,
we must first define it. In general terms, an economic bubble is "characterized by a surging increase in asset prices to levels significantly above the
fundamental value of that asset" (Campbell, 2011). The housing bubble was characterized by steeply rising home prices, with no corresponding rise
in home rentals as shown in Figure 1. Case & Shiller examine the origin of the term "housing bubble" stating that the term appeared a few times in
1987 after the stock market crash. The term was not seen again in any frequency until 2002, when the press popularized the term. The paper also links
housing bubble to the more widely used term "housing boom" which was described as being "much more neutral than 'bubble ' and suggests that the
rise in prices may

Bubbles: The Cause Of The Financial Crisis
1. What are bubbles & why do they always occur? Why can't we seem to learn the lessons of past bubbles? The film directed by Terry Jones,
Benjamin Timlett, and Bill Jones called "Boom Bust Boom," frequently brought up the term bubbles. In economics, bubbles are referred to as a
type of financial episode in which the price of an asset becomes completely attached of any actual value. These assets could be anything from
equities to tulips. The driving force behind the bubble was the belief that people put into the bubble. Humans always find some type of reason for
getting into the bubble. Often times, people decide to buy into this idea of a bubble because everybody else is doing it. It is human nature to follow
what everybody else is doing.... Show more content on Helpwriting.net ...
This hypothesis said that financial crises occur in a capitalist economy. It also said that stability leads to optimism and thus more borrowing in stocks
and houses. This causes the financial system to go from a stable structure to a fragile one. Overconfidence and a sense of financial euphoria lead to
increased borrowing. This same overconfidence is translated over to politicians who decide to relax financial regulations. Excessive borrowing occurs
and causes the financial system to be extremely unstable. Minsky emphasized the fact that our financial system is inherently unstable. People
contribute to this by forgetting the dangers with debt. Through his hypothesis, he was able to predict that another financial crisis like 1929 was going
to occur

The Dot.Com Bubble Phenomenon: The rise and fall of the...
When the internet first made an appearance in the business world, outside of government and military use, the term dot.com was introduced. The
technical term ".com" is defined as a suffix used to describe a company that uses the internet as a primary or only marketplace for transfer of goods
and services. It was being used as a suffix to the several existing web addresses. It only took a few months for .com websites to become the dominant
form of business transaction (Simpson & Simons, 1998). The phenomenon behind this story lies in the rapid rise and fall of the dot.com companies and
the players, events, and mindsets that accompanied the bubble boom and bust (Simpson & Simons, 1998). In 1995 Netscape was one of the first dot.com
... Show more content on Helpwriting.net ...
Therefore, with the mania which swept the dotcoms came a massive amount of short term expectations which fuelled the bubble, or the "gold rush."
Overall, according to the Wall Street Journal, expectations are considerably market–based (Wall Street Journal). With the introduction of dot.com
businesses, many rules were changed in the way global financial professionals used indicators to foreshadow the future prosperity of companies and
shares. The old–style economy players were already trying to play the "internet game" by shifting their standard of e–commerce. An important
investigation of the Wall Street Journal found that a strong belief and faith in the dot.com companies would be the blue–chip of the future and
eventually helped spread the bubble. The old economy rules were not applicable anymore to the Dot.com bubble situation of financial markets, where
most of the principles got lost and forgotten (White C. & Schreb, 2000). Now that the beginning has been laid out, it is important to show how the
atomic bomb of dot.com shares – commonly referred to as a bubble – was created and ignited. There are many reasons for the initial failure in the face
of the World Wide Web. The principal reason investors were so hasty investing in dot.coms is they thought the odds/statistics and probability were in
their favor for making capital gains on their investments. Obviously, this is why most investors choose to part with their money but there was strong
reasoning

The Role of the Community Reinvestment Act on the 2007...
The Role of the Community Reinvestment Act on the 2007 Housing Bubble Collapse The reality of the worst financial crisis in the last 80 years has
led to wide speculation of its causes. While a plethora of theories have been offered, none have been as persistent and as patently false as the assertion
that the Community Reinvestment Act of 1977 played a significant role in the housing bubble collapse. Critics of the Community Investment Act (CRA)
argue that by pushing banks to meet the credit needs of low–income borrowers, the law forced lending institutions to take on riskier loans that proved
to be fiscally irresponsible. The securitization and speculation of these low quality loans led to the housing bubble collapse and the wider ... Show more
content on Helpwriting.net ...
The Act dictated that relevant supervisory agencies ensure depository banks fulfill the credit and lending needs in the areas in which they were
chartered. The Act goes on to state that all business must continue to be conducted within sound operating practices. Compliance (or lack thereof)
would be taken into account when approving applications for expansion through new charters, mergers and acquisitions. The law makes no attempt to
evaluate the performance of any given institution, nor does it establish minimum criteria for granting an individual or business a loan. The CRA does
not mandate that an institution take on any particular types of loans, or approve certain applicants.
With the obvious incentives of complying with the CRA, local bankers began to tap into markets that would have been considered prior to CRA
enforcement in the late 70's. These lower–income areas proved fiscally viable, and began to draw the attention of financial institutions other than
depository banks. These investment banks were involved in speculative investment and resale of mortgages and were not regulated under the terms of
the CRA. Non–CRA covered lending institutions have played an increasingly large role in lending to low–income neighborhoods since the law was
enacted. The primary claim of those who believe the CRA played a

Housing Bubble Causes
Zack Dudan
Research Paper #1 (Rough Draft)
September 23rd, 2016
Dr. Lee
Causes of the Housing bubble How It Led to the Credit Crisis
In the year 2008, the United States experienced the most serious financial and economic crisis since the Great Depression of 1929. The economy,
after peaking in 2006, began to express warning signs of a dooming financial and economic recession. The primary cause of the entire recession was a
credit crisis resulting from the burst of the housing bubble. This analysis will be devoted to the study of the housing bubble and its burst. The housing
bubble was primarily caused by the low, short–term and variable interest rates, subprime loans given to less than qualified borrowers, and the collapse
of big time lenders ... Show more content on Helpwriting.net ...
The housing bubble was primarily caused by the low, short–term and variable interest rates, subprime loans given to less than qualified borrowers, and
the collapse of big time lenders and investors due to failing collateralized debt obligations (CDO's); all of these were made possible by a sense of
"irrational exuberance", a term coined by Alan Greenspan. There are two implications of the housing bubble burst that have not been touched upon yet.
First, Construction is an important economic activity; the decline in the construction would greatly reduce GDP. Secondly, the decreasing home prices
would reduce household consumption due to the wealth effect. The housing bubble collapse was the beginning of the 2008 recession, the worst
recession since 1929. Not only did it effect the homeowners, but it transpired into the labor market and had a slight tug in the global recession that
happened soon

The United States Housing Bubble Crisis
6.3 TRILLION DOLLARS! This is how much the value of homes have fallen in the United States since its real estate peak back in July of 2006.
After the price of houses peaked in 2006, they gradually started to decline until December 30th, 2008. This is when the Case–Shiller home price index
which measured the value of homes, reported its largest price decrease in its entire history. From there we saw prices continue to decline until we hit
all–time lows in 2012. The United States housing bubble burst will be talked about for years to come including many what caused it and how to
prevent such occurrences in the future. Low interest rates, Housing bubble, subprime mortgages, as well as securitization all contributed to the housing
market crash of 2008 and will all be explained in this paper. According to the general consensus, most people believe that the housing bubble was the
main cause of the 2007–2009 economic recession in the United States of America.
LOW INTEREST RATES
Mortgage rates in the United States hit an all–time high in the early 1980's at 18% in order to combat and push inflation out of the economy. Over the
next 20–25 years, interest rates continued to fall and even fell below 6% in 2002. Although there was a large amount of debt going on in the United
States at the time with little to no saving habits, interest rates were kept low by large amounts of investments into the U.S housing markets from
outside countries like China, Japan, Brazil and the United

China Housing Bubble
Week 2 Hand–in Assignment OUTLINE Thesis statement: The soaring property prices in China's coastline and major cities such as Beijing,
Shanghai, Shenzhen, and Dalian has formed the biggest bubbles in the real estate market in the decade. However, we do not see any slowdown in
these cities. As of today, the property prices seem to keep on growing forever. Will China's housing bubble pop? Compare the housing bubbles in the
United States with that in China * A brief background information about the housing market in US before it crashed down * Elaborate on China's
current housing market and see how close is it to the housing market condition in the US Different views on China's housing bubble * Optimists think
that even... Show more content on Helpwriting.net ...
2014). They argue that China's economy is a whole different picture than the US. First of all, they point out that the US housing crash damaged
most of the Americans' life, but such case is very impossible to happen in China because China saves far more than any other countries in the
world. Secondly, the Chinese government's debt is much lower compared to the United State; hence the government is more capable when it
comes to helping its banks in case of the assumed 20% of loans gone bad. Third, China's policymakers will take necessary strategies to ensure the
overall impact on the economy is not as strong as we have experienced in the crash down of the US economy, once the correction of the price is
foreseen. Some of the economists even debate that China's government will not allow the pop. As shown by the statistics, about 90% of the
population own at least one home, where 65% of people's investments are in the property market. If the bubble were set to pop, the Chinese
government will not be able to afford the consequences of the social unrest (The Bloomberg, 2014). So Xi will use all the necessary means to avoid
the housing market from crashing down. One of the attempts is to implement a charge of 20% property tax on the sale of the second home; and the
other is to require a 70% of down payment in the case of buying a second home. Not quite of a surprise though, before the new policies come to effect,
the real

Financial Bubbles
Financial bubbles occur within the United States economy, and trends in investments cause rising and falling within the economy. In the early–to–mid
2000s, the housing market took center stage for Wall Street investments. According to the podcast, Wall Street investors wanted increases in
investment returns, and the housing market became the prime source of these new, bigger returns. A "chain of command" started as banks decided to
indirectly cash in on these mortgage loans. As people defaulted on loans due to rising interest rates, this very large contribution of the economy
collapsed, and a recession of the late 2000s caused people to lose their jobs. This American Life gives a detailed account of the recession of the late
2000s brought on by the housing market, and it suggests how new trends in economic investing can... Show more content on Helpwriting.net ...
According to Mike Patton's article in Forbes, he cites the "dethroning of cash, the falling of the global economy making US stocks more attractive, and
the rising of intangible assets". (Patton, The Coming Financial Bubble) Because the United States economy still reigns strong compared to other
nations, stocks look attractive to investors looking for investments with substantial returns with relatively low risk. Patton also cites the lack of better
alternatives for investments, which I also agree with. Bond investments have less appeal because of falling interest rates, globally, and within the US,
leading the way for stock market investments to become the next bubble. After the recent ending of the house market bubble, stocks are starting to look
more and more attractive to investors, and as new industries, such as social media, technology, and new sustainable energy, are rising and continue to
attract investors, a new bubble will occur. This could have dire consequences, as the stock market is extremely important to the strength of the American

Housing Data Point Towards A Housing Market Bubble
Does Recent Housing Data Point Towards Another Housing Market Bubble?
The last housing crash was devastating to the global financial community. Considering the current trends in the housing market, are we becoming more
at risk for another housing bubble? The experts continue to debate this contentious question.
As home prices continue to skyrocket, speculation in the market persists and reinforces the upward trend in the housing market. Data from the National
Association of Realtors, or NAR, reveals that some of the conditions that led to the 2007–2009 housing bubble and crash began reappearing in 2015.
According to NAR, home price increases have been incredible in the previous years; in May 2015, 39 successive months of increases in housing
prices was recorded; since the last housing bubble and crash, from May 2014 to May 2015, home prices have gone up a staggering 7.9%. In addition,
the NAR noted that 5.1% of the existing housing market inventory sold, which when seasonally adjusted, equated to a rate of 5.35 million homes.
Recent financial data indicates median home prices have shot up more than a whopping 35% in the past 4 years, and the amount of residential real estate
sold increased up to or past 30%. Is the current housing market in correction territory? Although some would say it's only natural the housing market
push such new heights after reaching the lows of the last bubble explosion, others would argue that the market has ultimately grown too fast and for too

The Rise and Fall of the Dot.Com Bubble Essay
What was to ultimately turned out to be known as В‘The Internet' was developed in the 1960s through funding by the US military so as to discover
a means of making possible communication in the event of nuclear conflict . Until the beginning of 1990s, though, the Internet was the sphere of
influence of academics as well as researchers as commercial use was proscribed. A process of commercialization began in the late 1980s and the
wider use this encouraged was to be given an additional heightening with the emergence of the World Wide Web in the beginning of 1990s. The
progress of browsers in the early 1990s which facilitated web pages to be viewed in a graphical format in color after that brought the benefits of the
Internet to a wider... Show more content on Helpwriting.net ...
Once shareholders became drawn to stocks because everyone else was buying, realistic valuations of stocks based on their earnings potential got
crowded out by what Greenspan characterized in 1996 as В‘irrational exuberance'. This kind of bull market is typically fuelled by cheap money and
lots of debt. The low interest policy pursued by the Fed in the wake of the Asian crisis in 1997В–99 induced many investors to take out broker loans
for additional stock purchases. With shares serving as collateral for those loans, rising stock prices enhanced the borrowing capacity of investors and
so became a funding machine for the bull market. In addition, many firms took out a lot of debt to buy back their shares and so counter the dilution of
stock ownership brought about by the extensive use of stock options as a new form of employee compensation. It is this interaction between debt and
asset inflation which turns a reasonably bullish stock market into a speculative bubble.
Such a bubble is, however, unsustainable. It will burst when the rosy expectations about future profits underlying those sky–high stock–market
valuations turn out to have been unrealistic. As market sentiments shift and disappointed investors try to cash in their capital gains, selling waves ensue
to push stock prices rapidly lower. Pressured by high levels of indebtedness in the face of declining asset values and mounting capital losses, investors
rush to liquidate their

What Contribution Can Behavioural Finance Make to the...
M11 EFA BEHAVIOURAL FINANCE
What contribution can behavioural finance make to the explanation of stock market bubbles and crashes?
Name: Yuan Cao
SID: 2925215
Email Address: caoy5@uni.coventry.ac.uk
TABLE OF CONTENT
1 INTRODUCTION....................................................................3
2 BUBBLES AND CRASHES........................................................4
3 SOCIETY AND PSYCHOLOGY.................................................5
4 BEHAVIOURAL FINANCE FOR UNDERSTANDING BUBBLES AND CRASHES.................................................................................7
4.1 Overconfidence.....................................................................7
4.2 Representativeness and Momentum............................................9
4.3 Familiarity and Celebrity Stocks...............................................10
4.4 Narrow Framing and positive feedback trading............................12
4.5 Confirmation bias and denial...................................................12
4.6 Mental ... Show more content on Helpwriting.net ...
For example, an article on ShangHai Security News reports the individuals' herding behavior leads to Shanghai composite index rush to 6000 point and
plunge below 2700 points.(Liang Yufeng 2006) Unintentional herding arises from investors analyse the same information by using same method,
which often happen in fund managers. John R.Nofsinger (2011) found that the trading of institutional investors mainly drive the herding in stock
markets. Walter and Weber(2006) found that mutual fund managers bought stocks then price rises and sold then falls. (Keith Redhead2008) Therefore,
individuals may follow the strategy of institutional investors and result in unintentional herding.
In a bull stock market, blind and over chase rising lead to generate the bubbles; In a bear market, blind and hasty sell out stocks lead to crashes. The

herding behavior results in the great volatility of stock prices and decrease the stability and efficiency of the stock markets.
Investors predict current risk in stock market base on the past outcome, so they are willing to take more risks after gains and less risk after losses. (
John R. Nofsinger 2011: 35) These effects are called 'house money' and snake bite' effects. Gamblers do not regard the new money as their money
after gaining in the stock market, and they would like to use profit to invest and bet when stock prices rise. So house money effect contributes to
bubbles. Conversely, gamblers are willing to

Housing Bubble Research Paper
There are several long–term factors that could cause the housing bubble in Australia. One important factor is the financial deregulation. The financial
system was experienced a deregulation, resulting in the removal of different kinds of government policies concerning the lending financial institutions.
Meanwhile, an increasing number of new institutions, such as foreign banks, originators, mortgage brokers. New capital of finance for housing purchase
would move in the market in the residential market due to the situation. Another factor is the land supply and the land–use planning system. Land price
might be affected by the supply of developed urban land. The rules and effectiveness of the land–use planning system where was established ... Show
The Housing Industry Association of Australia (HIA) (Housing Industry Association, 2003, p. 14) estimates that, in the case of new housing, "the total
indirect tax take is over $124,000 in Sydney and $88,000 in Melbourne". In order to reduce the rate of house price inflation, the government was
requested to reduce the current levels of charges. Owing to a number of interacting forces determining housing prices are unlikely to have the desired
impact. What is more, the rising population in Australia results in the growth in the number of households, the main unit of demand in housing
markets. Due to Immigration of other countries, this has been a fundamental factor of housing developments and price inflation in some areas over the
long term. With the growth of economy and improvement of living standards, Australians are able to afford the house, leading to the price rise. It is
likely that house price inflation can occur on some areas where the average incomes of individuals increased. In almost all societies, housing in behalf
of the main family fortunes. When the value of existing house rise, the house owners and real estate companies would be confident to sell house with
raising the housing

Asian Economics Comment Bubble House
SCHOOL OF GRADUATE STUDIES CENTRAL PHILIPPINE UNIVERSITY LOPEZ JAENA STREET JARO, ILOILO CITY
____________________________________________________________________________ REACTION PAPER
Asian Economics Comment
Presented to:
Prof, Jima G.DeLeon, MBA
Professor, School of Graduate Studies
Central Philippine University
In Partial Fulfilment of the Course Requirement in
MBA 612
Financial Systems Presented by:
Mehrdad Alavi
MBA Thesis Option
September 13, 2013
I. PRELINMINARY
1– The title of paper is Asian Economics Comment, The anatomy of bubbles, part 1. It is written at August 27 2009 by Dr, Feredric Neumman, whom
is senior Asian Economist. The issuer of report is The Hongkong and... Show more content on Helpwriting.net ...
3– The subject matter portion is the main body of that paper which is started with the explanation of uncertainty. In the uncertainty situation economic
prospect is very difficult and the judge the risks. The policy makers reaction to a uncertainty situation has a critical important. If the Central Bank is not
alert to what is happening, it will discouraging picture of possible economic. Referring back to the US housing bubble which it as started from 2001
up to 2006 and remind that at that time low interest rate extended plus inflow of foreign saving and new financial instruments, all together made a worth
less situation for end users.
Let us take a brief look to the financial history in the asset market and specially buying house from 2001 to 2008. * The background of USA Housing
Bubble The housing bubble in the United States grew up alongside the stock bubble in the mid–90s. The logic of the growth of the bubble is very
simple. People who had increased their wealth substantially with the extraordinary run–up of stock prices were spending based on this increased

wealth. This led to the consumption boom of the late 90s, with the savings rate out of disposable income falling from close to 5.0 percent in the
middle of the decade to just over 2 percent by 2000. * Increase in Demand The stock wealth induced consumption boom also led people to buy bigger
and/or better homes, since they sought to spend some of their new stock wealth on

John Vogel's Thinking Outside The Housing Bubble
As we now know, the U.S. economy, the middle class, and its job growth was damaged by the overwhelming collapse of Wall Street, which was
triggered by the downfall of the housing market and sub–prime loan defaults. One of the main things that need to be addressed in our economy today
is the housing market and making sure that our banks and credit unions are not allowing people who do not have the necessary income to pay their
mortgage disbursements. In an article entitled Thinking outside the Housing Bubble, the author John Vogel remarks how the economy is generally
supported by the housing market. Vogel states:
On the other hand, if we view the problem as a credit bubble, we might be able to protect ourselves and speed up the recovery ... Show more content on
Helpwriting.net ...
The Federal Government needs to make sure to enforce strict guidelines on who can and cannot be accepted for a home loan, and not allow big
investors to borrow excessive money at low interest rates to inflate the investor's financial advantage. If the government starts allowing lower standards
on mortgages, we are going to end up in the same catastrophe once again. In an article written by U.S. News and World Reports entitled Should the
Federal Government Provide Support to the Mortgage Market?, the Federal government and the President attempted to get involved with the housing
market. The passage implicated that Obama wanted to do away with federally funded conglomerates Fannie Mae and Freddie Mac and implement
another type of government assisted program ("Should the Federal Government"). The program would prevent the mistakes made by Fannie and
Freddie which created the original "housing bubble burst" ("Should the Federal Government"). One of the Senate bills suggests the government create
"a new agency, the Federal Mortgage Insurance Corporation to replace Fannie and Freddie" ("Should the Federal

Technology Industry Is Heading Toward A Bubble?
So, what are some of the signs of tech bubbles? Why are certain experts convinced the current technology industry is heading towards a bubble? There
are certain situations that could signal the industry is inside a bubble.
IPO market saturation
First, IPO market saturation tends to be higher during a tech bubble. As mentioned above, during the dot–com bubble, companies flogged to the stock
market at alarming rates. Worryingly perhaps, the level of IPOs is currently getting closer to the levels of the 2000.
The high IPOs don't benefit the owners or the employees of the company, but play in the hands of the initial investors. Employees and owners typically
have lock–in periods for reselling the stock. But in a bubble situation, the stock ... Show more content on Helpwriting.net ...
Marketing firm CB Insights has studies a number of technology companies and noticed the overvaluation issue. For example, the ride hailing app
Uber received a valuation of 100 times its sales from investors. AirBnB's $25 million valuation is over 90 times its sales.
Private companies aggressively searching for fresh capital
But IPOs aren't always the only sign of a tech bubble. In fact, the argument now is there are too many private companies being backed by private
money. For example, in 2015, the number of tech company IPOs remained low, while the number of private companies receiving over $1 billion
valuations doubled in the past 18 months.
The problem of increasing VC interest is that companies tend to take as much as they can. Since equity is easy to obtain in the current climate,
companies might end up aggressively pursuing it even when it isn't necessary.
Funds and investors moving out of the industry
There's also the element of investors and funds beginning to move out from the tech industry. In a way, this condition is the final sign of a tech bubble,
as it often highlights the end of the bubble.

Since the bubble cycle is run by speculation and hope of future fortunes, if companies don't start providing returns at some point, investors may
disappear. Certain investment firms are openly starting to warn about the bubble and even funds find it harder to simply throw money at technology
firms.
Inefficient business models
Finally,

Theoretical Perspectives On Asset Price Bubbles
Asset prices are a key determinant of economic activity, impacting both consumption and private investment. Consequently, fluctuations in asset prices,
especially the bursting of bubbles, can have significant adverse effects on the aggregate economy. This was most recently demonstrated by the bursting
of the US sub–prime mortgage bubble and the ensuing financial crisis. Furthermore, asset prices in Australia have recently been in the spotlight, as there
are concerns about a potential real–estate bubble developing in some metropolitan centres. This paper will outline the theoretical perspectives on asset
price bubbles and explain historic examples. The insights from this analysis can be applied to analyse whether a bubble is developing in ... Show more
content on Helpwriting.net ...
However, these theories only apply to assets with infinite lives (land and shares), as investors know that assets with finite terms will be redeemed for a
specified value at maturity and this limits their secondary market price. According to Froot and Obstfeld, bubbles result from investors incorrectly
estimating fundamentals. For example, shareholders may be unable to forecast industry changes that affect future profitability and are forced to
condition expectations of future cash–flows on current payments. This 'intrinsic rational bubble' theory explains several empirical observations,
including why share prices over–react to dividend changes.
New Rational Models and Misaligned Incentives
These models emphasise the role of incentives in promoting bubbles. Key insights from these studies are that bubbles may be propagated by herding
behaviour among financial intermediaries, distortions in the data distributed by information agencies and limited liability.
According to Lamont and Frazzoni, investors tend to allocate funds towards intermediaries investing in high sentiment markets, thereby forcing
managers to perpetuate bubbles. This behaviour was a significant contributor to the dotcom bubble observed between 1997 and 2000. It has also been
highlighted that the reputation of a financial intermediary is correlated with the performance of

Reasons For The Housing Bubble
Introduction Housing bubble is basically a phenomenal increase in the real estate prices in local or global markets to a point, where these prices are
not sustainable and hence eventually decline abruptly. One of the most detrimental housing bubbles that we have witnessed was the U.S housing
bubble, which was one of major reasons which led to the recession in the USA during 2007–2009. This bubble can be indicated by the fact that
nominal housing prices had increased by 188% from the year 1997 to the year 2006, and then again fallen by 33% by the year 2009 (as per the S&P
/Case–Shiller 20 City Composite Home Price Index). There have been numerous explanations given by various authors and economists regarding the
causes of the U.S... Show more content on Helpwriting.net ...
Another reason which can be associated with the emergence of housing bubble has been the lowering down of lending standards by the financial
institutions, which led to mortgage lending being offered to less credit worthy customers. Further, another significant factor which contributed to the
U.S housing bubble were the affordable lending policies adopted by the government in the early 1990s which encouraged or rather forced the lending
institutions to offer credit exposure to the communities and neighbourhoods with low and moderate incomes. Therefore, one can notice that there are
varied opinions and views amongst economists regarding the causes of the housing bubble in USA and thus it becomes imperative to analyse those
opinions further in order to arrive at the most important cause (or causes) behind the U.S housing bubble. So, in my research, I am going to
investigate these causes extensively and put forward my analysis about how this housing bubble was created, how it increased to unsustainable levels,
the effects of the bursting of this bubble and finally if and how it could have been avoided. Literature Review During my quest for this research study,
I was introduced to various thoughts, ideas and studies which further helped me to do an in depth analysis of the topic. Many literatures have been
studied by me as part of

The Behavioral Finance Paradigm And Its Derived...
M11EFA
BEHAVIOURAL FINANCE
COURSEWORK
Name: Thi Thanh Van Mai
Student ID: 6026628
What contribution can behavioural finance make to the explanation of stock market bubbles and crashes?
Table of Contents
I. Introduction3
II. The behavioral finance paradigm and its derived explanations of the investors' beliefs3
III. Behavioral Theories used in the finance markets4
IV. Empirical Evidences in the stock markets6
V. Conclusion7
VI. References8
I. Introduction
There have been a number of models in the traditional finance paradigm which have the common assumption that the investors would act rationally and
consider all sources of information in their marking or investing decisions. That would also lead to ... Show more content on Helpwriting.net ...
In this trend, there are several models to support this view of these investors, including the Modern Portfolio Theory (MPT), Capital Asset Pricing
Model (CAPM) and Arbitrage Pricing Theory (APT) (Fama and French, 2004; Perold, 2004). They have been the main instruments that the rational
expectation based theories have been deploying. However, this traditional paradigm has been analyzed by a number of researches that the information
should not be considered to have a very important role in affecting investors (Miles and McCue, 1984), Titman and Warga (1986), Lusht (1988) and
Liu and Mei (1992).
II. The behavioral finance paradigm and its derived explanations of the investors' beliefs
This was also the driving dynamic for the behavioral finance paradigm, which has the origin from the above challenges that the traditional paradigm has

had. From its viewpoint, the investments that are made used to be made irrationality. Besides, this paradigm also made attempts to explore into the
investment market phenomena by proposing the two doctrines that the agents have been failed to update their beliefs correctly, and that there is the
typical deviation from the ordinary process of making choices of investments of the investors (De Long, Shleifer, Summers and Waldmann, 1990;
Froot and Obstfeld, 1991). In other words, from the viewpoint of the behavioral finance paradigm, these two are the main causes of the stock

Housing Bubble Essay
In the beginning days of the 21st century, the United States experience an increase in the price of real estate. The causes of the housing bubble were
many and, even after it collapse in 2007, the causes for it creation are still under scrutiny. As parties are still blaming each other, the losing party in
this crisis is the general public as they have been made responsible for it aftermath through the collectivization of the financial cost. Inquiries into the
causes of the housing bubble and its eventual collapse has brought to light an ever increasing number of players responsible for its creation, some
going back t the 1970s.
Since the 1970s, the United States government has attempted to expand the rate of homeownership through legislation and the ... Show more content on
Helpwriting.net ...
By 2009, "more than 15.2 million U.S. mortgages, or 32.2% of all mortgaged properties, were in a negative equity position." (Guiso, Sapienza, &
Zingales, 2013, p.1473) and about 26% of the existing defaults are strategic(Guiso, Sapienza, & Zingales, 2009). Research into the ethical implications
of strategic default shows that "eighty–two percent of respondents think it is morally wrong to engage in strategic default." (Guiso, Sapienza, &
Zingales, 2013, p. 1475). In the same study, Guiso, Sapienza and Zingales (2013), concluded that most people are unlikely to walk away from their
home if their home equity is only slightly negative, especially if they considerer it immoral to walk away. (Guiso, Sapienza, & Zingales, 2013, p.
1513). However, they also found that the emotional condition of the person and their perception of the unfairness of their financial situation will
increase the likelihood of strategic default. And in addition, they determined that there is a social component to the increase likelihood of choosing to
strategically default. According to their

The Bubble Economy. The Direct Cause Of The Japanese Banking
The Bubble Economy
The direct cause of the Japanese banking crisis was the collapse of the asset price bubble during the late 1980s to the early 1990s.
During 1980s, sustained economic growth and low inflation rate were the main characteristics of macroeconomic environment in Japan. This condition
caused the upward growth expectations of asset prices, uncontrolled credit expansion and financial deregulation.
At the same period, the United States has a substantial increase in the current account deficit and a sharp increase in the foreign trade deficit. In order
to depreciate the U.S. dollar by intervening in currency markets, five countries including France, West Germany, Japan, the United States and the
United Kingdom signed the Plaza ... Show more content on Helpwriting.net ...
At the same time, these financial institutions may loosen their credit standards in order to get higher loan market share. As a consequence, their
lending decisions were based more on collateral requirements rather than cash–flow analysis. In order to accelerate credit–check procedures for loan
approval, many banks transferred the responsibility for loan–risk evaluation from their credit–investigation bureaus to less independent monitoring
bureaus reporting directly to the banks' sales divisions.
The second problem is the defects in corporate governance of Japanese banks. First, because of the structure of bank ownership, few shareholders own
the majority of the total shares, most shareholders have modest control over the management of banks. Second, shareholders lack of incentive so it is
difficult for them to against managements' decisions. Third, the internal and external audit was very limited.
Besides, the central bank in Japan has also been criticized for its role in aggravating the bubble economy. The Bank of Japan used expansionary fiscal
and monetary policies to solve the fears of economic depression. After five rounds monetary easing from January 30, 1986 to May 30, 1989, the
official discount rate

Stock Market Bubble and Herding
Herding is an everyday phenomenon from personal to financial contexts. The focus of this paper is to explore the theory of herding, namely
Compensation Based Herding (CBH) and its effect on financial markets. The report aims to explain herding, assess the advantages and disadvantages
of CBH incorporating the 2008 financial crisis, and explore the possibility that CBH may have no effect on the financial markets. Herding occurs when
investors imitate each other and create a bandwagon effect. There are three general reasons why herding exists in financial markets. Firstly it is due to
uncertainty, where if investors are unsure of the markets, they will simply mimic each other's actions. Secondly, agents are compensated in relation to
the... Show more content on Helpwriting.net ...
An example of CBH can be seen in the 2008 financial system crisis. Investment banks began to emulate each other through a period of high volumes of
sub–prime mortgages. The demand for sub–prime mortgages was rising as hopeful home owners with poor credit could obtain such a mortgage by
paying little or no down payment and without going through proper tax documentation and credit checks. Investment banks borrowed more to purchase
the sub–prime mortgages and earned a commission fee when selling it to individuals and institutions. Decisions made across the investment banks
began to become more uniform, as these investors were compensated based on their performance measured against their peers. Investment banks were
making large profits, cashing in on the notion that as the demand for the sub–prime mortgages and houses went up, the house prices increased in
accordance. If the mortgage holders were to default, their houses were worth enough to cover their debts with the banks. However, they were ignoring
the blatant evidence that their investment portfolios were inefficient and highly risky. Publicly available information showed that these mortgage
holders were not able to meet their payments. Not only were their credit ratings exceptionally low as compared to other borrowers, these sub–prime
mortgages also carry interest rate structures with low "teaser rates" in the first few

What Contribution Can Behavioural Finance Make to the...
The occurrence of stock market bubbles and crashes is often cited as evidence against the efficient market hypothesis. It is argued that new information
is rarely, if ever, capable of explaining the sudden and dramatic share price movements observed during bubbles and crashes. Samuelson (1998)
distinguished between micro efficiency and macro efficiency. Samuelson took the view that majorstock markets are micro efficient in the sense that
stocks are (nearly) correctly priced relative to each other, whereas the stock markets are macro inefficient. Macro inefficiency means that prices, at the
aggregate level, can deviate from fair values over time. Jung and Shiller (2002) concurred with Samuelson's view and suggested that waves of over– and
... Show more content on Helpwriting.net ...
However there are times when irrational investors are dominant. A possible cause of market overreaction is the tendency of some investors (often
small investors) to follow the market. Such investors believe that recent stock price movements are indicators of future price movements. In other
words they extrapolate price movements. They buy when prices have been rising and thereby tend to push prices to unrealistically high levels.
They sell when prices have been falling and thereby drive prices to excessively low levels. There are times when such naive investors outweigh
those that invest on the basis of fundamental analysis of the intrinsic value of the shares. Such irrational investors help to generate bubbles and
crashes in stock markets. Some professional investors may also participate on the basis of the greater fool theory. The greater fool theory states that
it does not matter if the price paid is higher than the fundamental value, so long as someone (the greater fool) will be prepared to pay an even higher
price. The theory of rational bubbles suggests that investors weigh the probability of further rises against the probability of falls. So it may be rational
for an investor to buy shares, knowing that they are overvalued, if the probability–weighted expectation of gain exceeds the probability–weighted
expectation of loss. Montier (2002) offers Keynes's (1936) beauty contest as an explanation of stock market bubbles. The first level of the contest

Housing Bubble
According to Wikipedia a housing bubble is a type of economic bubble that occurs periodically in local or global real estate markets. It is
characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline. Four years into
the housing bubble downturn, much of the country remains hopelessly confused about what happened, why it happened and who is to blame. In my
research paper I will try and demonstrate what a housing bubble is, some of the reasons for the bubble, was it preventable, how it kept growing, how it
burst and how it has affected our economy. By definition a housing bubble is a temporary condition caused by unjustified speculation in the housing...
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Other scholars have emphasized the sharp deterioration in lending standards as contributing to the rise in housing prices as well as the importance of
changes to the mortgage market institutional structure. Other explanations of the bubble have been demand side explanations, meaning that the bubble
was caused by excessive consumer demand for housing. One leading explanation argues that the bubble was the result of irrational demand encouraged
by a belief that housing prices could only move upwards. Other research points to the fundamentals of housing markets, particularly population growth,
placing upward pressures on housing prices in markets with inelastic housing supply, thereby explaining some of the geographic variation in the
housing bubble. None of these explanations, however, is capable of fully explaining the housing bubble. From 1997 to 2006 nominal U.S. housing
prices rose 188%. By mid–2009, however, housing prices had fallen by 33% from peak. As the United States attempts to rebuild its housing п¬Ѓnance
system, it is of paramount importance to understand what caused the housing bubble. Until we understand how and why the housing bubble occurred,
we cannot be certain that a reconstructed housing п¬Ѓnance system will not again produce such a devastating bubble. As you can see there are
numerous theories and explanations for the bubble. Without getting too deep

Housing Bubble Case Study
Why This Isn't a Housing Bubble
Housing prices have been rising steadily, but rumors of a new housing bubble are tempering optimism. Many reports are suggesting that the current
housing bubble is greater than the one that formed in 2006 and burst in 2008. But is there any truth to these dire predictions, or is it just media hype
and speculation?
Overvalued Homes Don't Equal an Impending Crash
Compared to the first three months of 2015, twice as many metropolitan home markets are now considered "overvalued." Overvalued here means that
the prices are inflated compared to income. The media says prices are likely to come crashing down, yet experts say this isn't the case. Just because
home prices are overvalued doesn't mean there's an impending ... Show more content on Helpwriting.net ...
At $236,000, the average sales price of a home in the United States is now above what it was in 2006. Prices in 14 of the 100 largest metropolitan
markets in the country are now above their historical averages. Look a little deeper, however, and there are reasonable explanations for the spike in
prices. Of the 14 metropolitan markets mentioned above, six are in Texas, which recently experienced a huge oil boom. Texas may serve as a
microcosm for what's happening in the rest of the country.
High Demand, Low Supply
The most fundamental principle in economics is supply and demand. It just so happens that this very simple economic truth is the cause of the so–called
bubble; housing demand across the country is high, and supply is near record lows.
Ten years ago, the bubble was caused by free, easy credit that led many people to take out mortgages they couldn't afford. This isn't the case today–not
at all. Recent mortgage regulations are now beginning to take effect, and lenders and borrowers are more informed and acting more responsibly.
The Verdict?
Don't let the dire predictions in the media get to you. Mortgage rates are nearly 5% lower than their historic averages, making it an excellent time to
think about becoming a

The Boom And Bust Of The Housing Market Bubble
As a member of the Millennial's and as a student of economics, The Great Recession, the greatest economic downturn we've seen in 70 years is truly
an intriguing topic. It is the first economic crisis that many of my generation can truly say we lived through. With the burst of the housing bubble and
the failure of various financial institutions, the United States was dragged kicking and screaming from the prosperous age of nearly uninterrupted
economic growth since the early eighties, into an unemployment rate of over 9% and a decline in Real GDP in the first time in decades. Years after
the end of the recession we still reel from its effects. How did the fiscal crisis begin in the first place? What institutions helped exasperate the... Show
This led to the recession of 81–82 but managed to get inflation under 5% from the high double digits it was under Nixon at the cost of a rather high
unemployment rate of 10%. Many argue that this and other policies under the Reagan administration known as Reagonomics, were what led to the
economic prosperity that we enjoyed in the 90's and 2000's. Rather than discuss what caused the economic growth of the era, we examine a few of the
effects it had on markets, especially housing.
The family home has always been a major part of the American dream, but it had an even bigger role in the Great Recession. Under legislative
pressure banks eased up on a lot of the loans that they gave out. According to Peicuti (2014), "In the 2000s, the deregulation of the financial system and
development of the originate–to–distribute banking model led commercial banks to finance subprime mortgages" (p.7). It then goes on to lists several
characteristics that these borrowers may have including, "relatively high default probability as evidenced by, for example, a credit bureau risk...
bankruptcy in the last five years... debt–service–to–income ratio of 50 percent or greater" (p.7). All of this tells us the same story, these were risky
loans to make. We've learned from class that the interest rate is an indicator of the amount of risk on an asset. These loans however were not properly
assessed for the amount of risk on them. In short, the banks had taken on more risk than they

A Note On Housing Bubble

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A Note On Housing Bubble