Editing Greater fool theory (section)

== Crowd psychology ==
{{see also|Crowd psychology}}
Due to [[cognitive bias]] in human behavior, some people are drawn to assets whose price they see increasing, however irrational it might be.<ref>{{Cite web |date=30 December 2020 |title=Oxford Business Review - The Greater Fool Theory |url=https://oxfordbusinessreview.org/the-greater-fool-theory/ |access-date=7 November 2021 |website=Oxford Business Review |language=en-US |archive-date=3 March 2021 |archive-url=https://web.archive.org/web/20210303010655/https://oxfordbusinessreview.org/the-greater-fool-theory/ |url-status=dead }}</ref> This effect is often further exacerbated by [[herd mentality]], whereby people hear stories of others who bought in early and made big profits, causing those who did not buy to feel a [[fear of missing out]]. This effect was explained by economics professor Burton Malkiel in his book ''[[A Random Walk Down Wall Street]]'':

{{quote|A bubble starts when any group of stocks, in this case those associated with the excitement of the Internet, begin to rise. The updraft encourages more people to buy the stocks, which causes more TV and print coverage, which causes even more people to buy, which creates big profits for early Internet stockholders. Successful investors tell you at cocktail parties how easy it is to get rich, which causes the stocks to rise further, which pulls in larger and larger groups of investors. But the whole mechanism is a kind of Ponzi scheme where more and more credulous investors must be found to buy the stock from the earlier investors. Eventually, one runs out of greater fools.|Burton Malkiel<ref>{{Cite book |last=Burton |first=Malkiel |title=A Random Walk Down Wall Street |year=1985 |publisher=Norton |isbn=9780393019995}}</ref>}}