Why is the market value rising so fast in the past few years?

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by kCinvest

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)
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You can see if you can identify some of them in todays environment.

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