Is The Stock Market Overvalued? Measuring Instability
Over-valued markets typically have three ingredients: overvaluation, overconfidence, and easy money. If these three ingredients are present can state WITH CERTAINTY that these conditions create instability. Recognising this state of instability is vitally important. In the domain of physics much work has been done on this – not just theoretical, but to understand, for example, the occurrence of avalanches.