﻿ Bubbles: The Concise Encyclopedia of Economics | Library of
Economics and Liberty   by Seiji S. C. Steimetz About the Author
What Are Bubbles?  In 1996, the fledgling Internet portal
Yahoo.com made its stock-market debut. This was during a time of
great excitement—as well as uncertainty—about the prosperous
“new economy” that the rapidly expanding Internet promised. By
the beginning of the year 2000, Yahoo shares were trading at
$240 each.1 Exactly one year later, however, Yahoo’s stock sold
for only $30 per share. A similar story could be told for many
of Yahoo’s “dot-com” contemporaries—a substantial period of
market-value growth during the late 1990s followed by a rapid
decline as the twenty-first century approached. With the benefit
of hindsight, many concluded that dot-com stocks were overvalued
in the late 1990s, which created an “Internet bubble” that was
doomed to burst.  Thus, as this account implies, the definition
of a bubble involves some characterization of the extent to
which an asset is over