The best definition for a bubble in a stock market is?
A)a period of rapidly rising stock prices after a sharp fall in stock prices
B)sustained and steady growth in stock prices in line with economic growth
C)a rapid increase stock prices to levels inconsistent with the profitability of firms
D)quickly rising stock prices caused by rapid growth in the population
E)a rapid drop in stock prices once new information about the market is revealed

Question

Quizplus · Accepted Answer

A bubble in a stock market is when there is a rapid increase in stock prices to levels that are inconsistent with the profitability of the firms. This is often caused by investors' optimism and speculation rather than actual economic growth or profitability of the companies. When the bubble bursts, there is a sharp drop in stock prices, causing investors to incur losses.

The Best Definition for a Bubble in a Stock Market