In a separate post I have mentioned the dot-com bubble, whose inflation started in the mid-1990s and which finally burst in 2000; in the USA, this led to a 2-year growth stagnation and a mild recession (figure 1 - recession in grey).
Figure 1 - Real Gross Domestic Product (GDPC1)
That bubble was caused by irrational exuberance, to be interpreted as overly optimistic expectations of returns from investments in specific types of asset. The bubble involved stock of tech companies listed at NASDAQ.
Exuberance-driven bubble are of interest under the perpectives of efficient markets, rational expectations and behavioural economics. Despite the results of an inefficient allocation of resources, these bubbles are by far less damaging than credit driven-bubbles and have a shorter term effect on the economy.
The objective here is to simply display what the bubble looked like (figure 2).
Figure 2 - NASDAQ Composite Index (NASDAQCOM)
It is visible how the Index started to depart from a predictable trend from the mid 90s; the inflation of the bubble started in August 1998 and peaked in February 2000. The index declined steeply but it took just over one year to revert to its pre-bubble value.