However, if one takes the narrow definition of bubble very often used by these economic researchers4, there exists a fundamental difficulty in calling an observed asset price boom a bubble: It must be proved that given the information available at the time of the boom, investors processed this information irrationally. This is as the above example shows a formidable task.
Some economists would even argue that apparent evidence of irrationality should always be interpreted as a sign of hidden costs (to acquire or process information in a rational way) or model misspecification (which is responsible for the divergence between the model based fundamental price and the observed price).