Page "Market capitalization" Paragraph 7

It is possible for stock markets to get caught up in an economic bubble, like the steep rise in valuation of technology stocks in the late 1990s followed by the dot-com crash in 2000.

Hype can affect any asset class, such as gold or real estate.

In such events, valuations rise disproportionately to what many people would consider the fundamental value of the assets in question.

In the case of stocks, this pushes up market capitalization in what might be called an " artificial " manner.

Market capitalization is, therefore, only a rough measure of the true size of a market.

However, it does represent the best estimate of all market participants at any point in time — bubbles are easy to spot retrospectively, but if a market participant believes a stock is overvalued, then of course they can profit from this by selling the stock ( or shorting it, if they don't hold it ).