What is the concept of a financial bubble?

A financial bubble is a situation in which the prices of assets, such as stocks, real estate, or commodities, inflate rapidly beyond their intrinsic value due to speculative demand and investor enthusiasm. This often leads to a situation where the price is artificially high, driven by irrational expectations of continued price increases. Eventually, the bubble bursts when the demand for the asset starts to decrease, causing prices to fall sharply and leading to significant financial losses. Famous examples of financial bubbles include the Dot-com bubble of the late 1990s and the housing bubble of the mid-2000s.