The belief that stocks were overvalued in the late 1920s effect the American economy by causing the Wall Street Crash and the Great Depression in the 1930s
When talking about investments we must consider that everything that happens on the stock market is based on events or speculation, the stock markets definitely did not crash all of a sudden.
In the decade of the 1920’s, there was a huge rise in bank loans in the United States. The market was way overvalued, and people had false expectations
Prior to 1929, the market gave so much potential for being overvalued, which triggered people to buy a lot of shares based on unrealistic expectations. Even loaned money was used to buy even more shares, expected to gain a higher profit. In the end, prices were not much driven by any other economic factors than blind optimism.
so the final answer to both questions are:
Causing the Wall Street Crash and the Great Depression in the 1930s.
People held on to their stocks, hoping for profits.
