An asset bubble occurs when the prices of certain assets, like stocks or real estate, rise rapidly to levels that are not supported by their fundamental value. This often happens due to excessive speculation, where investors buy assets expecting prices to keep increasing, rather than based on the actual worth of the asset. When the bubble bursts, prices can plummet, leading to significant financial losses. Bubbles can be driven by various factors, including low interest rates, easy credit, and investor psychology. Historical examples include the Dot-com Bubble in the late 1990s and the Housing Bubble leading up to the 2008 financial crisis. Understanding these dynamics can help prevent future economic downturns.