> The share price is basically set by adding up all the future earnings of a company and applying some discount. The share price should be approximately the av

> The share price is basically set by adding up all the future earnings of a company and applying some discount. The share price should be approximately the average different peoples' estimates of the future earnings. There's no one organization setting share prices (you know this, but at the level of explanation you're giving, you should make this clear). During a bubble, people sometimes by shares (or houses, or tulips, or any other goods) knowing they aren't worth the price, but expecting that some "greater fool" will buy them at a higher price because "everybody knows" the price is going up and up. Then the music stops, the market runs out of greater fools, everyone realizes they're stuck holding shares that are worth much less than they paid.