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Stock Price Bubble Dissection Requires a look at Fundamentals and Speculation

Identifying a Bubble Requires Separating Fundamentals from Speculation

Stock market bubbles are easy to identify in hindsight. The dot-com boom, the run-up to the global financial crisis, and the surge in technology stocks during the pandemic are all familiar examples. But identifying a bubble while it is forming is much more difficult. The challenge is that rising stock prices do not necessarily indicate speculation. Prices may increase because investors expect stronger earnings growth, lower future returns, or improving economic conditions.…