There is no specific value inherent in the asset it

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there is no specific value inherent in the asset, it is based on what people believe the price should be and then people react on that priceFrom a relative perspective what is a person willing to pay for an asset IN THE FUTURE (trends/fads/crowd craze)
A speculative event (bubble) is a situation in which prices are rapidly risingand there is a high volume amount of trading that are at odds with somemeasure of true or intrinsic value. Even long-run speculative events orbubbles will burst. oWe are supposing bubbles exist, but like efficiency, bubbles are just a mental construct and there is the model issue of joint hypothesis test
SPECULATIVE EVENTS:Dutch Golden Age Tulip Market:What can you tell me about the supposed speculative bubble of the early 1600swhich has come to be known as Tulip Mania?
Consider the following chart:
What can you tell me about the conglomerate era of the 1960s?Difficult for firms to vertically integrate due to anti-competitve behavior; thusfirms decided they could merge and create “synergies” by cutting excess staff (only need on CEO, one accounting department, ect.) which will create valueCross-selling to create value and diversification against risk (one division doing better than another)Investors wanted to see earnings grow, easiest way to do that is to buy up firms with lower Price to Earnings ratio, which in turn makes your company’searnings seem to grow just by merging
PE Ratio – price to earnings, firms trade at different ratio based on expectations of future growth and industry differenceoA high PE raito is justifiable based on high potential for generating a lot of earning in futureo

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