It's very simple.The market tends to overvalue shares on an...

It's very simple.

The market tends to overvalue shares on an upward trend and undervalue them on a downward trend.

This usually happens within the small caps section of the market where large funds don't have a presence so it's easy to misprice assets.

Interestingly it also seems overvaluation is mostly due to retail funds buying at the peak out of greed and fear of missing out, which is also when smart money is exiting the stock. Undervaluation as well seems to be from retail investors selling out of exhaustion and lack of confidence, which also coincides with the time smart money re-enters the stock.

In summary, a lot of retail investors end up buying high and selling low.