  We present a dynamical theory of asset price bubbles that exhibits the
appearance of bubbles and their subsequent crashes. We show that when
speculative trends dominate over fundamental beliefs, bubbles form, leading to
the growth of asset prices away from their fundamental value. This growth makes
the system increasingly susceptible to any exogenous shock, thus eventually
precipitating a crash. We also present computer experiments which in their
aggregate behavior confirm the predictions of the theory.
