How did speculative investing weaken the stability of the stock market?

2 answers:

7 0

Speculative investing weakened the stability of the stock market because people were "over-investing" in companies--meaning that that companies were becoming highly over-valued, which led to an economic "bubble" that eventually popped in the Crash of 1929.

Montano1993 [528]3 years ago

3 0

Speculative investing weakens the stock market in two ways. The first way is people take excessive risk often at the wrong time to try to make above average returns. When those investments have to be liquidated, often at lower prices, it causes a negative cycle of downward prices. The second problem is that downward cycle is both fast and extreme. That extreme volatility causes instability in the markets.

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