Introduction ....................................... 1 The Castles in the Air Theory ................. 1
The Firm Foundations Theory ................... 2
Assessing the Tulip-Bulb Craze ..................... 3
Assessing the Internet IPO Bubble .................. 5
Importance of the Castles in the Air Theory ........ 7
Conclusion ......................................... 8
References ......................................... 9
This research examines two theories related to stock investing strategies. The theories are (a) Castles in the Air and (b) Firm Foundations. The basics of the theories, including their effects on market prices, are explained in this Introduction. Following the explanations of the theories, the stock market phenomenon referred to as a "craze" is examined by assessing the Tulip-Bulb Craze and the Internet IPO Bubble in relation to the two theories. Finally, the importance of the Castles in the Air Theory is discussed.
The Castles in the Air Theory in relation to investing in equity stocks focuses on the psychologically-based and emotionally-based decisions made by some general investors, as well as decisions made by some professional investors based on interpretations of the likely emotionally-based decisions that will be made by general investors. Such investment decisions do not consider the fundamental characteristics of an investmen