If some stock is overvalued, an investor pays more to own a share than company's fundamentals would suggest.

But: it's still supply & demand! If there's many buyers willing to pay more than fundamentals suggest is wise or 'fair', so be it. As long as demand for those shares stays up, investors can sell their share(s) for same overvalued price they bought it for.

Also there may be buyers expecting company to become wildly profitable at some point. Call that a gamble (maybe an educated gamble?). Maybe shareholder just wants to financially support whatever 'cause' that company is pursuing.

Worst case, those shares are hot potatoes & someone will be holding the bag some day. Should I care? Should you? Imho: as long as the 'gamblers' footing the bill when things go south, and the people profiting while things go a-okay, are 1 and the same: let 'm have fun.

Problem is when rewards are in one place, while risk is held by others (negative externalities, 'too big to fail', taxpayer funded bailouts & the like).

> A higher RG value indicates a larger gap between market valuation and the estimated fundamental base — meaning the market is pricing the company at a significant multiple of what the fundamentals alone would support. A lower RG value suggests that the market price is closer to being covered by the fundamental base.

This is dumb. They’ve decided that their estimate of the true value is the correct one, and then calculate the difference from that. But of course, the fundamental issue is everyone has a different estimate. There’s no reason to believe their estimate is better than anyone else’s

[1] https://hstre.github.io/Reality-Gap/methodology/