In this paper, we study if and how having two differentiated assets affects bubble formation. We consider differences in assets' intrinsic characteristics as well as trading regulations that help differentiate two otherwise identical assets. We find that, compared to trading regulations, differences in assets' intrinsic characteristics encourage more arbitrage across assets and thus help reduce mispricing significantly. We also find that short‐term speculation does not depend on how assets or markets are being differentiated. As a result, short‐term speculation cannot be used to explain why bubbles are smaller when two assets are intrinsically different than when they are not. (JEL C91, F34)