Investigating the hows and whys of financial bubbles
Homeowners lost more than $7 trillion of wealth when the housing bubble burst in ’07.
The Dotcom bubble wiped out 78 percent of the Nasdaq Composite’s value in the ’90s. And the Dutch tulip bubble’s collapse left behind a colorful trail of financial ruin as early as the 1600s.
At NJIT’s Leir Center for Financial Bubble Research, the focus is on developing a better understanding of this “bubble” phenomenon. Why do financial bubbles develop? How do we predict them? And, most importantly, how do we deal with the economic mess created when they burst?
Professor William Rapp, director of the Leir Center at NJIT’s School of Management, is dedicated to answering these questions. One of the few to warn of the housing bubble’s dangers well before it burst, Professor Rapp sees an increasing incidence of bubbles. What’s more — and somewhat surprising — is the question of whether all bubbles are harmful to the same degree, and whether certain bubbles have a redeeming aspect.