Answer to Question #8927 in Economics of Enterprise for Shawnette Mackell
Discuss the non-rational factors that may have a role in the valuation of stocks and stock market equilibrium?
Non-rational behavior of investors is shown in making investment decisions as incorrectly pricing securities, which leads to the market inefficiencies and, in turn, they are opportunities to make money. Such factors as fast market-changing events that caused by the strong interest of buyers and sellers to the market influence the valuation of stocks and stock market equilibrium. This interest appears on the base of information from press releases, of rumors, euphoria and mass panic. Thus person's emotions make to think that stocks are way overpriced but buys them anyway, thinking he or she can find an even bigger fool to sell the stock to at a profit.