Which of the following best describes a price 'bubble'?
A)Abnormal returns that are not explained by EMH.
B)The movement over time in a security's price where an increase is equally likely to be followed by a fall as a further increase.
C)Periods where share prices fall because of pessimistic sentiment.
D)Periods where share prices rise because of optimistic sentiment.
E)Periods where prices rise as a result of excessive optimism that are followed by a sharp correction.

Question

Quizplus · Accepted Answer

A price bubble is a period where prices rise as a result of excessive optimism that are followed by a sharp correction. This is characterized by a rapid and unsustainable increase in price, often fueled by speculation and investors' expectations of continued price increases. Eventually, the bubble bursts and prices rapidly decline, leading to significant losses for investors who bought in at the peak.

Which of the Following Best Describes a Price 'Bubble