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A stock market bubble occurs when the prices of stocks or other financial assets rise significantly above their intrinsic value, driven by irrational investor behavior, speculation, or excessive optimism. Eventually, the bubble bursts, leading to a sharp decline in prices. Bubbles are often fueled by hype, easy credit, and herd behavior, and they can have severe consequences for the broader economy when they collapse.
The dot-com bubble of the late 1990s saw a massive rise in technology stock prices, which collapsed in the early 2000s, wiping out billions of dollars in market value.
• A situation where stock prices rise far above their intrinsic value.
• Fueled by speculation, irrational investor behavior, and hype.
• Bubbles eventually burst, leading to significant market declines.
Warning signs include rapidly rising stock prices, widespread speculation, and stocks trading far above their intrinsic value.
Prices drop sharply, leading to losses for investors and potentially causing wider economic disruption.
Bubbles form when investor enthusiasm and speculation drive prices far beyond the underlying value of the assets.
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