All have incentives to create bubbles

Sophisticated investors have perfect information about the market, they know the fundamental prices. Usually we think if they explore bubbles, they would hedge against the mis-pricing and bring the market prices to the fundamental prices. However, in reality, this is not the case. They have the incentives to further expand bubbles, and short the market prices at the point where the bubbles burst; this strategy will give these sophisticated investors the biggest profits. On the other hand, because of the existence of noise traders, when the bubble is very small, the sophisticated investors may have to wait every long to get their returns. When the time period is longer, the cost for shorting increases, and if they seek funding from individuals, their sponsors may be impatient and want to withdraw their money from the sophisticated investors.

However, such strategy is only profitable and relatively safe for large institutional investors. Institutional investors are more able to influence the market prices and are powerful to influence and affect the point where the market turns (although they do not have full control of it). For smaller investors, this strategy is very risky, because they do not know when the turn will occur. It is also not ideal for them to short the market if the market is above its real value either, the reason is explained above. So for small investors, their strategy that is profitable and less risky is to long the underpriced assets. And if they want to take some risk to get higher returns, they estimate the size of the bubble that is not likely to burst immediately and hold their assets till the market bubble size reaches their estimation, and sell their assets.