Conclusion

Abstract

The standard paradigm in financial economics assumes that stock market valuation is in line with fundamentals. Rational investors discount cash flows appropriately and markets clear at a price which accounts for the fundamental characteristics of the stock. Recent turmoils in the stock market have cast some doubt on this hypothesis. Irrational exuberance has become a major concern of central bankers, policy makers, and investors alike.

Discovery commences with the awareness of anomaly, i.e., with the recognition that nature has somehow violated the paradigm — induced expectations that govern normal science. (Thomas Kuhn)⁷⁴