Basically, a few behavioral finance luminaries expose their theory that for investors to really learn not to create bubbles, they need to get burned twice. Once is not enough apparently!
"Investors become largely immune to bubble-causing behavior only after living through the bursting of two successive bubbles. Because of this, the typical pattern is for a burst bubble to be followed by a somewhat less extreme version of the original — a phenomenon that some call a bubble echo. This pattern has appeared so consistently and so regularly in psychological experiments that you can almost set your clock according to it.”
Not only that but, according to the article, "researchers have found that a market decline after the bursting of a bubble echo tends to be larger the more years have passed since the first bubble popped."
How's that for reassurance?
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