Why do stock markets crash

Bubble pathology: a. The bubble starts smoothly with some increasing production and sales or demand for some commodity in an otherwise relatively optimistic market. B. The attraction in investments with good potential gains leads to increasing investment with leverage coming from international investors. Price appreciation occurs. C. This in turn attracts less sophisticated investors, leveraging is further developed which leads to the demand for stock rising faster than the rate at which real money is put into the market. (earnings) D. At this stage, the behavior of the market becomes weakly coupled or practically uncoupled from real wealth. E. As price skyrockets, the number of speculative investors decreases and a period of nervousness starts until a point when the instability is revealed and the market collapses.