Price Discovery

-A method of determining the price for a specific commodity or security through basic supply and demand factors related to the market.  

Price discovery is the general process used in determining spot prices. These prices are dependent upon market conditions affecting supply and demand. For example, if the demand for a particular commodity is higher than its supply, the price will typically increase (and vice versa)

Market Efficiency

-The degree to which stock prices reflect all available, relevant information.  

Market efficiency has varying degrees: strong, semi-strong, and weak. Stock prices in a perfectly efficient market reflect all available information. These differing levels, however, suggest that the responsiveness of stock prices to relevant information may vary.

The efficient market hypothesis (EMH), a controversial principle stemming from the theory of market efficiency, states that a market cannot be outperformed because all available information is already built into all stock prices. Practitioners and scholars alike have a wide range of viewpoints as to how efficient the market actually is.

Speculative Bubble

-A temporary market condition created through excessive buying, and an unfounded run-up in prices occurs.  

Speculative bubbles are generally a result of the "bandwagon effect". Investors, seeing an upward trend in prices, quickly enter long positions in an attempt to participate in the stocks' profitability. Typically, these bubbles are followed by even faster sell-offs once the prices begin to decline.