This book sheds new light on the role of speculative bubbles in the stock market and argues that, provided they are sustainable, bubbles may in fact have a positive effect on the market.

Several studies published in the early 1990s found that a large fraction of stock return variations can be explained by future values of measures of real activity in the United States by using data samples from the 1950s to the 1980s. This paper presents evidence that the relation does not hold...