13 lines
1.6 KiB
Markdown
13 lines
1.6 KiB
Markdown
# Greater Fool Theory
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The greater fool theory is a thesis in economics that market participants can sometimes profit from the purchase (i.e. [speculation](speculation.md)) of overvalued assets , assets whose [market value](market-value.md) drastically exceeding their [fundamental-value](fundamental-value.md) , if those assets can later be resold at an even higher price to another market participant who makes the same assumption and so on ad infinitum.
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The greater fool theory presumes an infinite chain of fools in order for all participants to profit or "make it" or profit from the [bubble](bubble.md).
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## References
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1. Mackay, Charles. 2012. Extraordinary Popular Delusions and the Madness of Crowds. Simon and Schuster.
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1. Bernstein, William J. 2021. The Delusions of Crowds: Why People Go Mad in Groups. Grove Press.
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1. Blanchard, Olivier J, and Mark W Watson. 1982. ‘Bubbles, Rational Expectations and Financial Markets’. NBER Working Paper, no. w0945.
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1. Caferra, Rocco, Gabriele Tedeschi, and Andrea Morone. 2021. ‘Bitcoin: Bubble That Bursts or Gold That Glitters?’ Economics Letters 205: 109942. https://doi.org/10.1016/j.econlet.2021.109942.
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1. Chancellor, Edward. 1999. ‘Devil Take the Hindmost: A History of Financial Speculation’.
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1. Demmler, Michael, and Amilcar Orlian Fernández Domínguez. 2021. ‘Bitcoin and the South Sea Company: A Comparative Analysis’. Revista Finanzas y Política Económica 13 (1): 197–224.
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1. Smales, L. A. 2022. ‘Investor Attention in Cryptocurrency Markets’. International Review of Financial Analysis 79: 101972. https://doi.org/10.1016/j.irfa.2021.101972. |