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Asset market bubbles are ‘like an illness’

Praveen JProfessor of Economics Praveen Kujal talks to mdx.ac.uk ahead of his inaugural lecture

Asset market bubbles are a pervasive feature of economics throughout history. From the first recorded speculative bubble in 1637, when tulip mania reached its peak during the Dutch Golden Age, to the dot-com bubble of the late 90s, the world has witnessed dozens of spectacular economic crashes.

But what fuels them? This question is at the heart of Professor of Economics Praveen Kujal's inaugural lecture, 'Asset Market Bubbles', on 19 November 2014.

"Ultimately, any valuation is a guess," Professor Kujal explains. "And it's human nature to believe good news will continue, while bad news will be short-lived."

His research has looked at other factors too – such as whether trading with a client's money rather than your own makes bubbles more likely as well as how messages (informative and uninformative) and ambiguity impact trading and asset prices.

Despite the events of recent history, Professor Kujal is very clear on the subject of policy. "We live in a free society," he says. "The focus should be on education, especially for inexperienced people trading at home via the internet."

However, there is a significant stumbling block that stands in the way of any potentially successful training programme.

"Bubbles are like an illness – we only know there is a problem once the patient is sick," Professor Kujal concludes.

To find out more about Professor Kujal's lecture on 19 November 2014 at the Hendon Campus and to book a place, visit our events page.

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