| Summary: | The past 30 years have shown a steep rise in the number of financial crises and bubbles in the financial and real estate markets. Given master’s thesis attempts to figure out the causes of the real estate bubbles during the series of crises in Scandinavia in the 1990s and in the Baltic countries and Iceland during the global financial crisis. The undertaken study covers theoretical aspects of financial crises such as financial instability hypothesis, concepts of crisis, origin of crises, herding and disaster myopia of investors. The theory of real estate bubbles is also thoroughly reviewed, as well as different viewpoints on the types of bubbles, signs of financial bubbles, cycles of the real estate, concluding with a summary of advantages and disadvantages of the real estate investment. The research is based on the methods of case analysis and cross-case analysis. The results of the research show that every creation of an asset bubble, and more particularly a real estate bubble, is preceded by a prolonged "boom" period, characterized by over-optimism of investors in their judgements. The burst of the bubble creates instability in the economy, as unemployment increases and prices decline. This study aims to make understanding of the crises in Scandinavia in the 1990s and in the Baltic countries and Iceland more transparent and integrated. Numerous outcomes of the crises and behaviouristic patterns of investors during the boom periods and after the collapses are described. Based on this aggregated knowledge and "lessons from the past", a better approach to handling crises can be developed.
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