Greater Fool Theory

This is a theory that the price of a product or asset is formed not by intrinsic value but by the irrational beliefs or expectations of market participants. It refers to the bullish sentiment that even if one is a "fool" who bought a product or asset at a high price, if there is a "greater fool" who will buy it at an even higher price, that high price is justified. In other words, one pays a price that looks "foolishly" high in the expectation that the product or asset can later be resold to a "greater fool." It is a concept similar to passing the bomb.

Topics: economic theory,top signal
Category: Wiki/Economy