Market participants ignore warning signs during periods of irrational exuberance from "summary" of A Short History of Financial Euphoria by John Kenneth Galbraith
Market participants during periods of irrational exuberance tend to overlook or rationalize warning signs that suggest the ongoing speculative euphoria may be unsustainable. This behavior is driven by the prevailing mood of optimism and the desire for continued gains, which can cloud judgment and lead individuals to ignore potential risks and vulnerabilities in the financial system. As John Kenneth Galbraith aptly notes, "The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version."The phenomenon of ignoring warning signs is particularly prevalent in times of market booms, where individuals become increasingly complacent and convinced of their ability to accurately predict market movements. This overconfidence can further exacerbate the situa...
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