Stock market bubble
The 1920s saw the widespread introduction of a range of technological innovations including radio, automobiles, aviation and the deployment of electrical power grids.These hot IPO markets misallocate investment funds to areas dictated by speculative trends, rather than to enterprises generating longstanding economic value.Emotional and cognitive biases (see behavioral finance) seem to be the causes of bubbles, but often, when the phenomenon appears, pundits try to find a rationale, so as not to be against the crowd.Thus, sometimes, people will dismiss concerns about overpriced markets by citing a new economy where the old stock valuation rules may no longer apply.Still, some analysts cite the wisdom of crowds and say that price movements really do reflect rational expectations of fundamental returns.In both instances, closed-end country funds and experimental markets, stock prices clearly diverge from fundamental values.In attempting to maximize returns for clients and maintain their employment, they may rationally participate in a bubble they believe to be forming, as the benefits outweigh the risks of not doing so.
FinanceMarketsAssetsAsset (economics)Asset growthCapital assetCommodityDerivativesDomainsEquityForeign exchangeOver-the-counterPrivate equityReal estateParticipantsAngel investorBull (stock market speculator)Financial plannerInvestorinstitutionalRetailSpeculatorLocationsFinancial centresOffshore financial centresConduit and sink OFCsInstrumentsCollateralised debt obligationCredit default swapTime depositcertificate of depositCredit lineDepositDerivativeFutures contractIndemnityInsuranceLetter of creditMortgageOptionexoticPerformance bondsRepurchase agreementSecuritySyndicated loanSynthetic CDOCorporateAccountingCapital budgetingCapital structureCorporate financeCredit rating agencyEnterprise risk managementEnterprise valueRisk managementFinancial statementsLeveraged buyoutMergers and acquisitionsStructured financeVenture capitalTaxationBase erosion and profit shiftingCorporate tax havenTax inversionTax havenTransfer pricingPersonalCreditEmployment contractFinancial planningRetirementStudent loanPublicGovernment spendingFinal consumption expenditureOperationsRedistributionTransfer paymentGovernment revenueDeficit spendingBudgetbalanceNon-tax revenueWarrant of paymentBankingCentral bankDeposit accountFractional-reserveFull-reserveInvestment bankingMoney supplyLists of banksBank regulationBanking licenseBasel AccordsBank for International SettlementsFinancial Stability BoardDeposit insuranceSeparation of investment and retail bankingRegulationFinancial lawInternational Financial Reporting StandardsISO 31000Professional certificationFund governanceEconomic historyPrivate equity and venture capitalRecessionStock market crashAccounting scandalsOutlineeconomic bubblestock marketsstock valuationBehavioral financecognitive biasesgroupthinkherd behaviorEmanuel de Wittecrashesfinancial activities of the 17th-century Dutch Republicstock exchangemarketDutch tulip maniaspeculative bubbleMississippi Scheme