Which of the following is correct concerning stock market irrationality?
A)Speculative bubbles could arise, in part, because the price that people pay for stock depends on what they think someone else will pay for it in the future.
B)Economists almost all agree that the evidence for stock market irrationality is convincing and the departures from rational pricing are important.
C)Some evidence for the existence of market irrationality is that informed and presumably rational managers of mutual funds generally beat the market.
D)The value of the stock depends only on the stream of future dividend payments.

Question

Quizplus · Accepted Answer

Speculative bubbles are a prime example of market irrationality, where the price of stocks is driven not by fundamental values but by investors' expectations of being able to sell the stock for a higher price in the future. This phenomenon does not rely solely on the intrinsic value of the stock, such as future dividend payments, but rather on speculative trading behaviors.

Which of the Following Is Correct Concerning Stock Market Irrationality