Castle-In-The-Air Theory

Business, Legal & Accounting Glossary

Definition: Castle-In-The-Air Theory

Castle-In-The-Air Theory

Full Definition of Castle-In-The-Air Theory

The Castle-in-the-Air Theory, one of the Investment Theories, is rather opposite in its postulations compared to the Firm Foundation Theory.

The Firm Foundation Theory believes and tries to understand the intrinsic value of any stock or other asset.

The castle-in-the-air theory delves deep into another aspect of investing behaviour – it tries to unravel and understand the psychic values and behaviour of the group of investors.

This theory was made popular in 1936 by John Maynard Keynes, a famous economist (as also an investor) and the theory postulates that the investors try to build a sort of castles in the air and think of the probable price rise in the future than estimating the intrinsic values of stocks.

Once the investor has estimated this, he/she tries to beat the crowd by building positions in the preferred stocks before the crowds (read other investors) start buying those stocks and the price surges ahead.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Castle-In-The-Air Theory. Payroll & Accounting Heaven Ltd.
October 04, 2022
Chicago Manual of Style (CMS):
Castle-In-The-Air Theory. Payroll & Accounting Heaven Ltd. (accessed: October 04, 2022).
American Psychological Association (APA):
Castle-In-The-Air Theory. Retrieved October 04, 2022
, from website:

Definition Sources

Definitions for Castle-In-The-Air Theory are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 3rd May, 2020 | 0 Views.