eftirspurnarbóla

Eftirspurnarbóla, a term originating from Icelandic economics, describes a situation where an asset's price increases due to escalating consumer demand, rather than fundamental value. This phenomenon is driven by a self-reinforcing cycle where rising prices themselves become a primary reason for further purchasing. Individuals might buy an asset not because they believe it is inherently worth more, but because they anticipate its price will continue to climb, allowing for a quick profit through resale.

This speculative behavior can detach asset prices from their underlying economic realities. Factors that can contribute to an eftirspurnarbóla include widespread optimism, easy access to credit, and a general belief that prices will always rise. The market can become increasingly illiquid as the focus shifts from long-term investment to short-term trading.

When the speculative bubble eventually bursts, often triggered by a change in market sentiment, a sudden economic shock, or a tightening of credit conditions, the rapid decline in prices can lead to significant financial losses for those who bought at the peak. The concept highlights the dangers of irrational exuberance and the importance of grounding investment decisions in fundamental analysis rather than solely on past price performance. It is a reminder that asset bubbles, regardless of their specific cause, can have destabilizing effects on an economy.