A person may be willing to pay more than the fundamental value of a stock today if he or she believes that someone else will pay even more for it in the near future. When many people purchase stocks based on this reasoning, the stock market can develop: A speculative bubble Moral hazard Informational efficiency

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Answer:

The correct answer is letter "A": A speculative bubble.

Explanation:

As prices grow beyond their true value, a speculative bubble develops. Bubbles may grow in economies, stock markets, housing markets, and other sectors whenever a shift in business behavior causes investors to chase returns that go beyond their reasonable expectations of return.

Bubbles continue to grow until investors discover that prices rise far above where they should be to the point that prices drop to a more realistic level when the bubble pops up.

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