Financial crisis is a bubble created by excessive investor inclination towards a particular market. It shadows the valuations and when the bubble bursts, the investors want to exit and therefore rapidly start selling their stake.
Too much of capital led to lower interest rates and this in return forced the investors to look for creative investment platforms where the yield was high. This requirement led to an unprecedented growth in the securitization market as the inclination towards such derivative instruments was high. Investors were willing to take higher risks as compared to the returns they would receive for their investments. Greed for higher returns, excessive leverage and low volatility led to the financial crisis of 2008.… Read the rest