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Who isn’t baffled by the continuing run-up in stock prices? Behavioral scientists. They explain that we have a host of biases that make us irrational. Here are the reasons that we have a stock market bubble, presented in two tables.

Bubble Inflators

Behavioral Bias

1 Vaccines will cure the pandemic quickly

Base rate fallacy

2 Earnings will soar in an economic recovery

Gambler's fallacy

3 Federal Reserve will dump $trillions

Hyperbolic discounting

4 Interest rates will remain low

Recency illusion

5 Greed: FOMO is fear of missing out

Dread aversion

6 Investor euphoria: Hopium

Irrational escalation

7 Huge foreign demand

Confirmation bias

8 Millennials believe markets only go up

Continued influence effect

9 FAANG Stock phenomenon

Less-is-better effect

10 Apple &Tesla are each worth a fortune

Neglect of probability

11 The election.

Normalcy bias

12 Belief that amateurs can beat Wall Street

Overconfidence effect

13 Stock buybacks

Outcome bias

14 SPACs: Special Purpose Acquisition Companies

Pro-innovation bias

15 IPOs: Initial Public Offerings

Decoy effect

16 Inflation caused by money printing is ignored

Money illusion