Overvaluation: meaning, definitions and examples

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overvaluation

[ˌoʊ.vərˌvæl.juˈeɪ.ʃən ]

Definition

^{Context #1 | Noun}

The act of assigning a higher value to an asset than its true worth, leading to an inflated price.

Word	Description / Examples
overvaluation	This term is often used in finance and economics when the price or worth of something is deemed higher than its actual value. The overvaluation of tech stocks in the early 2000s led to the dot-com bubble. Investors are worried about the overvaluation of the housing market.
inflation	In economics, this term refers to the general increase in prices and fall in the purchasing value of money. While it can be confused with overvaluation, it is not an overestimation of value but rather an economic condition. The government is taking measures to control the inflation rate. Rising inflation has affected the cost of living for many families.
overestimation	This word is more broadly applicable than 'overvaluation' and can refer to any situation where something or someone's ability, quality, or size is judged to be greater than it actually is. There was an overestimation of how many people would attend the event. The team’s overestimation of their opponent’s skills led to a poor strategy.
exaggeration	This word is commonly used in everyday language to describe situations where someone makes something seem larger, more important, or more extreme than it actually is. Saying that he could run a mile in four minutes was certainly an exaggeration. The media's exaggeration of the facts caused unnecessary panic.

Overvaluation often occurs in stock markets when investors believe a company's future earnings will be much higher than they really can be.
Housing bubbles are a classic example, where property prices rise significantly above their true market value.
In economics, this concept can lead to market corrections when the actual value is realized.

People tend to overvalue things they own, a phenomenon known as the endowment effect, where ownership increases perceived value.
Cognitive biases, like optimism bias, can lead people to believe that their investments will perform better than they realistically will.
The Dunning-Kruger effect can also contribute, where individuals with limited knowledge overestimate their understanding and the value of their opinions.

Art pieces can be overvalued due to inflation in the art market, often influenced by celebrity endorsements or market trends.
The value of collectibles, such as stamps or coins, can sometimes be inflated due to rarity, yet many may not fetch their estimated prices at auctions.
Many factors, including an artist's fame and historical context, can make artworks seem more valuable than they are in objective terms.

Tech companies often experience overvaluation during initial public offerings (IPOs), especially if they promise futuristic products without proven sales.
The rise of cryptocurrencies showed many instances of overvaluation as investors speculated about digital currencies without understanding their true utility.
Tech bubbles, resembling the dot-com bubble of the late 1990s, often lead to dramatic corrections when reality diverges from inflated expectations.

Trends in consumer behavior can lead to overvaluation in certain products, like fashion items, where hype surpasses actual utility or quality.
New trends in sustainability have sometimes led companies to overvalue their eco-friendly initiatives, tempting consumers to pay more based on perceived benefits.
Overvaluation in commodities can occur when supply is stable, but speculative trading drives prices artificially high.

Translations of the word "overvaluation" in other languages:

🇵🇹 supervalorização

🇮🇳 अधिमूल्यांकन

🇩🇪 Überbewertung

🇮🇩 penilaian berlebihan

🇺🇦 переоцінка

🇵🇱 przecenienie

🇯🇵 過大評価 (kadai hyōka)

🇫🇷 surévaluation

🇪🇸 sobrevaloración

🇹🇷 aşırı değerleme

🇰🇷 과대평가 (gwadaepyeongga)

🇸🇦 تقييم مبالغ فيه

🇨🇿 nadhodnocení

🇸🇰 nadhodnotenie

🇨🇳 高估 (gāogū)

🇸🇮 precenitev

🇮🇸 ofmat

🇰🇿 құндылықты артық бағалау

🇬🇪 გადაფასება

🇦🇿 həddindən artıq qiymətləndirmə

🇲🇽 sobrevaloración