The psychology of a stock market bubble

Worry about a bubble is widespread at the top of a bubble

Robert Shiller, the Yale finance professor and Nobel laureate. According to him, a bubble is “a market situation in which news of price increases spurs investor enthusiasm which spreads by psychological contagion from person to person, bringing in a larger and larger class of investors, who, despite doubts about fundamental value, are drawn to the investment partly through envy of others’ successes and partly through a gambler’s excitement.”  

Needless to say, things don’t go up forever. Those who nevertheless continue to invest in such an environment do so with the implicit assumption that they will be able to recognize it, in advance, when the bubble is about to pop—and therefore able to leave the party before everyone else. 

Mark Hulbert MarketWatch 21 April 2021 

https://www.marketwatch.com/story/the-psychology-of-a-stock-market-bubble-11619198164

 

Why the next bear market could shave 35% off the Dow

Mark Hulbert MarketWatch June 14, 2019 

https://englundmacro.blogspot.com/2019/06/why-next-bear-market-could-shave-35-off.html