Article Abstract:
Speculation can become a mania during a boom, and can undermine the rationality and efficiency of markets. Bubbles are easy to identify with hindsight. Real estate bubbles in the United Kingdom have sometimes ended with crashes, as occurred in 1974 and when interest rates rose after the late 1980s. There are forecasts that internet stocks could become bubble investments. There are a number of reasons for this view, such as the possibility that technological change may hit internet companies before they have become profitable.
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Article Abstract:
Equities are less risky over long-term periods, but investors have still suffered losses even when they have invested for ten years, as an analysis of historical data shows. The risk of a real loss for a ten-year investment is one in 15, or less than 7%. There are also transaction costs which tend to be higher for equities than for government securities and cash, and which depress returns. Equities appear to have become safer due to greater economic stability
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Article Abstract:
World economic growth has been stable in the 1990s, partly because major world economies are at different parts of their business cycles. This may not last indefinitely, and volatility will increase because governments have abandoned fiscal policy and even exchange rate policy in some cases in Europe, which were previously used as stabilization tools. This will affect share prices and investments as a whole, and diversification will become more important.
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