In this context, I would stress instead that we should be mindful of the risk that “search for yield” activities enter into a self-fulfilling cycle and destabilize the markets and the economy. The combination of higher prices and the lower volatility of an asset induces investors to overvalue liquidity of the asset and drive up prices.
This could in turn invite another round of investment, raising asset prices in a self-fulfilling manner. In addition, if a rise in asset prices creates overly bullish expectations among non-financial entities such as the corporate and household sectors, it could trigger excessive risk-taking behavior in these sectors as well.