The selection of 2 standard deviations isn’t arbitrary
It’s based on analyzing the 28 bubbles prior to their bursting and seeing at what level the danger zone started – 2 std deviations was picked based on this analysis
You make it sound like someone pulled ‘2 standard deviations’ out of their ass and decided to run with it – hardly the case here
Read Grantham’s work if you are really interested
“Extraordinary Popular Delusions and the Madness of Crowds” is another good book explaining bubble dynamics – it was first published in 1841 and is just as applicable today as it was then – bubbles haven’t changed any in the last 160+ years – the only difference is that today’s credit/housing bubble is the biggest bubble in the history of the world
