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How did speculative investing weaken the stability of the stock market? The flurry of investing artificially raised the price of stocks. Conservative investors sold their stock due to the increase in risky investments. When speculative investing increased, the real value of companies decreased. The risky investments caused banks to stop loaning money to investors
"When speculative investing increased, the real value of companies decreased." Speculative investing means that investors make decisions on where they think the company will go, not the actual value of the company.
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