Discrepancy between real and perceived value triggers crashes from "summary" of Why Stock Markets Crash by Didier Sornette
The discrepancy between real and perceived value can trigger crashes in financial markets. This occurs when investors' perceptions of the value of an asset diverge significantly from its actual intrinsic value. This misalignment can create a bubble, where the price of the asset is inflated beyond its true worth. During a bubble, optimism and greed drive prices higher as investors believe that the asset will continue to appreciate in value. This positive feedback loop can lead to an unsustainable rise in prices, detached from the fundamental factors that should determine the asset's value. As the gap between real and perceived val...Similar Posts
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