Many other positive feedbacks such as the wealth effect, relative valuation methods, and the increased ability to borrow against inflated asset prices operate in financial bubbles and bull markets.
What we find when we break up the various factors to examine them individually is that growth matters for stocks, but that its main effect is not in the total valuation of stocks, but in their valuation relative to bonds.
When hunting for tech stocks, investors should consider not only traditional factors like valuation and income growth, but also the "network effect, " says Kishore Rao, a research principal with Sustainable Growth Advisers in Stamford, Conn.