IMF Report Ties Asset Bubbles To Incentives, Says They Will Continue

A recent International Monetary Fund white paper wonders why, in an economic environment surrounded by quantitative easing, asset bubbles occur when generally experienced investors are involved? The IMF white paper, “Asset Bubbles:Re-thinking Policy for the Age of Asset Management,” takes the efficient market philosophy apart by trying to solve the “puzzle” of why seemingly well-informed, educated and experienced market participants invest and maintain in asset bubbles. His conclusion is that financial incentives for asset managers drive results and that asset bubbles are likely to continue.   “Candidate explanations” for why asset bubbles occur are “unsatisfactory” Report author Brad Jones first…