The Causes of Formation of the Price Bubbles in the Capital Markets

This study analyses, why and how price bubbles are made on the capital markets, how different economical theories see their development and implications, how these theories could predict them and which impact bubbles have on the economy as whole and separated markets. Special accent is given on the paradigm of the behavioral finance, theories flowing from the Austrian school, fundamental analysis and other indirect factors. These problems are (in connection with nowadays world financial crisis) widely discussed among economists. The problem of price bubbles was in focus during 20's, 30's, 70's and 90's. The last part tries to find out a difficult way, how to prevent bubbles and what possibilities are during the attempts to find them. This paper operates with deduction and economical analysis method. Conclusion summarizes the results and tries to outline future development.