When market prices are much higher than fundamental or rational analysis would tend to support, the market is said to be in a(n):
A) Fantasy land
B) Cloud
C) Inverted state
D) Bubble
E) Winner's state

Question

Quizplus · Accepted Answer

When market prices are significantly higher than what fundamental analysis would justify, it indicates a bubble in the market. This means that the prices of assets are driven by exuberance and speculation, rather than by fundamental valuation of assets. When the bubble bursts, prices can plummet quickly and significantly, sometimes causing significant financial losses for those invested in the market.

When Market Prices Are Much Higher Than Fundamental or Rational