Definition of Echo bubble:
Echo bubble is a post-bubble rally that becomes another, smaller bubble. An echo bubble may also be referred to as a false bottom or a dead-cat bounce. The echo bubble occurs in the sector or market in which the preceding bubble was most prominent, but the echo bubble is less inflated and thus, if it also bursts or deflates, will leave less damage behind.
An echo bubble occurs when prices undergo a temporary, premature rally before the correction has fully run its course and washed out the overexhuberant or excessive support for prices in the original bubble. It can be thought of as a kind of false bottom to the bust, which gives way a stronger, longer-term downward trend. An echo bubble may also colloquially be referred to as a dead-cat bounce, because even a dead cat will bounce if you drop it from high enough. .
A bubble that forms when the stock market or the economy starts its recovery prematurely from a burst bubble. This occurs because investors start feeling more confident that they should be about the situation. Post bubble rallies typically become another smaller bubble. Eventually echo bubbles also burst.
How to use Echo bubble in a sentence?
- An echo bubble is a smaller bubble in the price of an asset or asset class that occurs after a larger bubble bursts. .
- Echo bubbles were first identified in economic experiments and have since been documented in many historic market bubbles.
- Echo bubbles can result from the same forces that drove the initial bubble or as an effect of policy responses that seek to reinflate the initial bubble.
Meaning of Echo bubble & Echo bubble Definition