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What happens after a stock bubble?

Updated: 12/19/2022
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Q: What happens after a stock bubble?
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Describe a stock market bubble Explain what causes a bubble and why a crash generally follows a bubble?

A stock market bubble can be defined as an economic cycle in which there is a rapid expansion, which is followed by contraction. Basically, too many investors become too eager to buy. When they realize the value of the stock is going down, and sell off to save some of their money. The crash usually happens because when there is a bubble, the investment class gets to a point when prices don't justify the underlying value.


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What are the consequences of the stock market bubble?

The consequences of a stock market bubble are generally recession and the need for more monetary stimulus. That increase in monetary stimulus means more money printing that may not stop until a recession, stock market crash, or both occurs.


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stock prices being higher than their real value :)


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