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These are the most common causes for bubbles to be sustained:
- Disinflation (rising equity prices on falling inflation)
- Easy credit & low interest rates
- Real broad MZN growth acceleration (liquidity trade)
- Behavioural finance (herd mentaility, overreaction to good news)
- Rising public participation (stock market euphoria, friends and colleagues making money)
- Monetary excess (pumping liquidity into the system)
- Technological breakthrough (hard to establish market price on future cash flows, new valuation metrics)
- Rational investors not acting as price stabilisers (limits to arbitrage, afraid of losing customers, shorting in bubble is dangerous)
You can see if you can identify some of them in todays environment.