>What mystifies me about this idea is why assets are
>always incorrectly overvalued by people who ought
>to come to know better.
Surely you've read chapter 12 of Keynes's General Theory, Max. Truer woidz wuz never spoke.
There are at least explanations. One, something established by experimental psychology: that people overvalue recently received information at the expense of everything they'd known earlier. So the enthusiasm of the moment takes precedence over the oughtness of what people should know better. Two, if you do know better, you suspect that others don't, so you position yourself early and take advantage of the enthusiasms of others. And three, there's in the financial markets, unlike most of the rest of the world, rising prices attract buyers. All these things can work in reverse in bear markets.
Doug