Overvalued assets are vulnerable to sharp declines from "summary" of Irrational Exuberance by Robert J. Shiller
When assets become overvalued, they are at risk of experiencing sudden and significant drops in value. This vulnerability arises from the gap between the inflated prices of these assets and their underlying intrinsic worth. This phenomenon can be particularly pronounced in markets where investor sentiment is being driven by irrational exuberance and speculative behavior. Investors may become caught up in a cycle of optimism and herd mentality, pushing asset prices to unsustainable levels. However, these inflated prices are not supported by any fundamental economic factors, making the assets suscept...
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