What is the greater fool theory?

However, one commonly discussed theory related to the continuation of a bubble is "The Greater Fool Theory". The Greater Fool Theory is the idea that, during a market bubble, one can make money by buying overvalued assets and selling them for a profit later, because it will always be possible to find someone who is willing to pay a higher price.

Are speculative bubbles based on a greater fool theory?

Critics contend their value is only based on the ability to sell to a greater fool until there are no fools left. This is known as the greater fool theory, which may help explain various speculative bubbles in the past, present, and future. William Bernstein is the author of The Delusions of Crowds.

What is greater-fool trading?

The greater fool theory assumes that even if an asset—or entire market—is detached from its fundamentals, there will always be someone (a “greater fool”) to take it off your hands. Greater-fool trading is an extreme version of trend- and momentum-following strategies employed by chart watchers.