Walk Down Wall Street

Stock Valuation from the Sixties through the Nineties

Malkiel notes that there were a number of speculative trends from the 1960s to 1990s, and that they all mended up in the same way. Every few years, the stock market has another bubble or speculative mania which soon crashes and levels off, such as overvalued food stocks in the 1980s or the Nifty Fifty blue chips in the 1970s, but in both cases the speculative phase ended and stocks returned to their normal values. By the 1990s, institutions accounted for more than 90% of the trading volume on the NYSE, and yet professional investors participated in several distinct speculative movements from the 1960s through the 1990s. In each case, professional institutions bid actively for stocks not because they felt such stocks were undervalued under the firm foundation principles, but because they anticipated that some greater fools would...
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