ILLUZION

What exactly is an illusion? Accoring to Cambridge Illusion is an idea or belief which is not true.
But what do you call something which is believed to true by almost all the agents in an economy.
say a piece of land in bangalore which used to cost Rs 1 million just a year ago now costs upward of 3million.... should the person who bought the site by chance or in other words took the risk and put the money be so handsomely rewarded. but lets see if high risks are always highly rewarded even if on the long run. other asset prices in the region say, the share prices or the value of the precious metals, everything seems to have gone up. but what is the proportion of increase in the assets compared to the risks associated with it. high risk assets like equties have given high returns and the returns on some assets like land is due to other factors than just the growth that is taking place.

Events in economic paralance happen on expectation basis. Shares which represent capital are priced on the basis of expected earnings. well what is earnings the cash flow that is available to shareholders. the absolute amount itself is near impossible to predict accurately hence there is an expected range. now say somehaw we do have and estimate but what will be the value of money say Rs20million after 2 yrs. the value of money itself might change. But we make lots of predictions, forecasts, estimates and some guesstimates some of which might come true some may not, so in finance we essentially live with an illusion