The “Greater Fool Theory” applies to a mania, such as for internet stocks (in the 1990s) or for real estate (in the 1970s). The investing fundamentals of holding that asset might be poor, but the “fool” who holds it believes that there is a “greater fool” who will buy it at a higher price. If the mania stops, the “fool” is left holding the asset, unable to sell it to a “greater fool.” The “greater fool theory” can be a highly risky one.
 
The term “greater fool theory” has been cited in print since at least 1965 and 1967. The investment sense of “greater fools” has been cited in print since at least June 1962.
 
 
Wikipedia: Greater Fool Theory
The greater fool theory (also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to “a greater fool”; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else at an even higher price.
 
It is similar in concept to the Keynesian beauty contest principle of stock investing.
 
Some consider it a valid method of making money in the stock market, particularly momentum investors; however, fundamental investors believe that market participants eventually realize that the price level is too outrageous (too high or too low) and the speculative bubble pops. The greater fool theory relies on market optimism and market momentum concerning a particular stock, an industry, or the market as a whole.
 
The opposite of the greater fool theory is value investing, or contrarian investing, which tries to discount, or even actively go against, the prevailing market psychology. Value investors such as Warren Buffett believe that it is corporate profits which are the normal returns from stock investments and any higher return is possible only due to the greater fool theory.
 
Investopedia
What Does Greater Fool Theory Mean?
A theory that states it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone (a bigger or greater fool) who is willing to pay the higher price.
 
BusinessDictionary.com
greater fool theory
Observation that any price (no matter how unrealistic) can be justified if a buyer believes that there is another buyer who will pay an even-higher price for the same item. This line of thinking causes and fuels stockmarket and commodity market booms and manias which, in due course, lead to busts and paranoias.
 
24 June 1962, New York (NY) Times, pg. 101 ad: 
THE TRUTH ABOUT THE STOCK MARKET CRASH
(...)
SENSE VS. NONSENSE
Yet we could not—nor could anybody else—tell exactly when the expected decline would occur. Trends can, and often do, persist beyond reason. (The techniques for detecting changes in trend are known to us as well as to others. But very few trend-followers are in reality able to unload on the “greater fools” at the very last moment, and the Value Line Survey is not in any case dedicated to that kin of opportunism.)
(The Value Line Investment Survey—ed.)
 
14 December 1963, Pasadena (CA) Star-News, “Weekly Stock Review,” pg. 6, col. 1:
Broker Says Rally Phony
In explaining the apparent lack of interest in the market during the week one broker said, “the strong rally that followed President Kennedy’s assassination was a professionally encouraged burst of uniformed popular enthusiasm. The last stages of the rally looked as phony as a nine dollar bill and the public once again appears to have resisted those who were hoping to treat them as ‘greater fools’ in the oldest speculative game in the world.”
(The broker is Bradbury K. Thurlow of Winslow, Cohn & Stetson—ed.)
 
Google Books
Growth Opportunities in Common Stocks
By Winthrop Knowlton
New York, NY: Harper & Row
1965
Pg. 173 (Index):
“Greater fool” theory, 19
     
2 July 1967, New York (NY) Times, “Speculative Fever on Busy American Exchange Is Worrying Wall Street” by Terry Robards, pg. 12, col. 1:
“Greater Fool Theory”
The S.E.C. also is known to be keeping a sharp eye on these firms, but has yet to take any official action. Such houses exist partly because the man in the street occasionally seems so ready to adopt the “greater fool theory” in his stock trading.  This theory has it that even though a stock may have few solid fundamentals to recommend it, enough persons are likely to buy it to push its price up. The trouble is that somebody usually gets stuck—and the practitioner of the theory may discover to his dismay that he, himself, has become the “greater fool.”
 
Google Books
31 March 1969, New York magazine, “Millionaires Being Paid Enough?” by Martin Mayer, pg. 38, col. 1:
Where once men spoke solemnly of “conservation of capital,” now they argue about the validity of “the greater fool theory.” (Philip Sassower of Sassower, Jacobs and Schneider, who came to a destiny in brokerage from the Harvard Law School rather than the Harvard Business School, defines the theory with distaste as, “Sure, we’re paying five times what it’s worth, but somebody will soon pay us seven times what it’s worth.”)
     
Google Books
Confessions of a Wall Street Insider
By C. C. Hazard
Chicago, IL: Playboy Press
1972
Pg. 100:
Each buyer from now on is operating on what Wall Streeters call the Greater Fool Theory. Each figures that, though he may be a damned fool for buying into a new and untried company, he will always be able to find a Greater Fool to buy the stock from him at a still higher price.
 
Google Books
August 1976, Changing Times (The Kiplinger Magazine), pg. 17, col. 2:
The “greater fool theory” says that whatever price you pay for a stock, there will always be a greater tool to buy it from you at a higher price. This seldom works out in practice.
   
OCLC WorldCat record
Companies, People, Ideas - Repair Man - Is Alec Gores a turn-around genius or the Greater Fool Theory personified?
Author: Kelly Barron
Publisher: [New York, N.Y. : Forbes Inc., 1918-
Edition/Format:  Article : English
Publication: Forbes. (November 13, 2000): 71
Database: ArticleFirst
Other Databases: British Library Serials
 
OCLC WorldCat reord
European Trader - Tech stocks have entered “Greater Fool” territory
Author: Vito J Racanelli
Publisher: Chicopee, Mass. : Dow Jones & Co., 1994-
Edition/Format:  Article : English
Publication: Barron’s. (April 12, 2004): MW12
Database: ArticleFirst