Headed For Bubble Trouble?

The market rebound may be investor optimism run amok

Why has the stock market recovered so quickly from its 10% swoon over three sessions in late October? Was there some positive news that caused millions of investors to put on green eyeshades, fire up their spreadsheets, and conclude that the real value of stocks exceeded current market prices? That's what a believer in the efficiency of markets would say. An alternate theory is that instead of scrutinizing the assets of companies, investors scrutinized one another for clues about what to do. They concluded that other investors would buy on the dip--so they did it themselves. And stock prices shot back up.

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