If stock prices rise at a very fast rate, this may be indicative of:
A) a speculative bubble.
B) low covariance with the market.
C) moderate profitability forecasts.
D) All of the answers are correct.

Question

Quizplus · Accepted Answer

A rapid rise in stock prices may indicate a speculative bubble, in which the price of the stock is being driven up by hype and speculation, rather than by its underlying fundamentals. This can lead to an eventual crash when investors realize that the price is not justified by the company's actual performance. Low covariance or moderate profitability forecasts do not necessarily indicate a speculative bubble. Therefore, options B and C are not the best choices.

If Stock Prices Rise at a Very Fast Rate, This