Which statement is TRUE of speculative bubbles in stock prices?
A) They are easy to detect by simply looking at the trends in stock prices.
B) They can never be detected even after they occur.
C) They are difficult to detect until after they burst.
D) They never exist in stock markets.

Question

Quizplus · Accepted Answer

Speculative bubbles are fueled by hype, expectations, and speculation rather than fundamental economic or financial factors. As a result, they are difficult to detect until after they burst, revealing that the market was overvalued. In retrospect, it is often clear that the exuberance was unwarranted, but at the time it is challenging to differentiate between a legitimate increase in stock prices and a speculative bubble.

Which Statement Is TRUE of Speculative Bubbles in Stock Prices