greater fool theory

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Greater fool theory

An investment notion that even when a stock is fully valued by conventional standards, there is room for upward movement because there are enough buyers to push prices farther upward purely on speculation or hype.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Greater Fool Theory

The idea that there is always a buyer for a security who will pay a better price than the seller paid. That is, the greater fool theory states that if an investor buys a security at a high price, he/she will be able to find a buyer who will pay an even higher price. The origin of the theory's name comes from the idea that if an investor makes a foolish decision to buy an expensive security, he/she can find a greater fool to take it off his/her hands. The greater fool theory is important to the formation and continuation of speculative bubbles, and only works until the bubble bursts.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

greater fool theory

The theory that no matter what price an investor pays for a security, someone else with less sense will be willing to buy it later. The greater fool theory reaches its height of popularity near the end of a bull market when speculation is high.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

greater fool theory

An investing theory that supports buying overvalued property in a hot market because a greater fool will come along and buy it from you at a profit.Like the game of musical chairs,the greater fool theory breaks down when one misjudges when the music will stop and there won't be enough fools (chairs) to go around.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
In retrospect, the greater fool theory usually turns out to be a poor justification for investment.
Bitcoin investment is a "greater fool theory" where purchasing decision is based solely on the hope that the next dude will buy it at a higher price than what he did.
It's kind of a pure 'greater fool theory' type of investment," he said.
He explains that the greater fool theory is displayed when an individual buys a house or a piece of land without caring whether the property is overvalued.
Simply counting on someone to pay a higher price than you did is called "the greater fool theory" for a reason.
Equities will hit a wall and tumble sharply on the realisation that the only driver for the market is the greater fool theory. Meanwhile, the malaise in France only deepens under the mismanagement of the Hollande government.
Actually, the market was moving according to the herd behavior and the so-called greater fool theory. As investors tend to buy or sell in the direction of the market trend, and there were many perpetual optimistic market participants who bought overvalued assets in anticipation of selling it to other speculators at a higher price.
Anyone getting in on the action at such a point is doing so on the basis of the greater fool theory - assuming they will find someone who will pay an even higher price.
However, at the end of the day, if implemented successfully, these opportunities are not rewarded by the greater fool theory.
There was not a lot of rationality in the market, and the Greater Fool theory dominated.
* The contract may not be bogus, but the contract amount may reflect the old real estate axiom "The Greater Fool Theory." Just because someone is willing to pay more for a property does not necessarily make the price "market value."
The greater fool theory of public company valuation operated.
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