Stock market bubbles are:

Question

Quizplus · Accepted Answer

Stock market bubbles occur when there is a persistent and expanding gap between stock prices and the prices warranted by the fundamentals (such as earnings or dividends), leading to an unsustainable increase in stock prices. This eventually results in a sharp correction or crash. A is incorrect because higher profits by a firm can lead to a legitimate increase in stock price, but it does not necessarily indicate a bubble. C is incorrect because while bubbles can lead to crashes, they are not synonymous. D is incorrect because a slow increase in the stock market reflects market fundamentals and does not indicate a bubble.

Stock Market Bubbles Are