Bubblecovery

Posted in Finance, Accounting and Economics Terms, Total Reads: 121
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Definition: Bubblecovery

Bubblecovery refers to a situation of false (which is not real) economic recovery from the long sustained recession.

The term Bubblecovery was first coined by economist Jesse Colombo. When the economic recovery from the recession seems to be on the way, but the recovery is just an imitation of the actual recovery. The prices of the assets in the markets seems to be rising imitating the recovery of the economic conditions. The housing prices, company valuations in rising stock markets, rising cost of living may be factors which make incorrect projections of growth of the economy. It may be hard to detect due to the asymmetric information available. While the investors may see the current progress of the markets and the signs of recovery, the immediate future may turn the situations around investors realizing that recovery was not actual.

The investors who see Bubblecovery as the real recovery make speculative investments with only short term gains. Basically Bubblecovery is the mask under which the recession projects itself as the all is well condition of the economy.

For Example: If suppose a country was in a recession for past few years. Now the rates of the housing markets starts to rise and valuations of the companies go up when the markets starts to soar. It looks like the country is coming out of the recession. But in actual the markets have risen not due to internal factors of the country while they have started to rise with outside factors into play. This creates a situation of Bubblecovery where the recovery seems to be happening but is not actually there.

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