(FORTUNE Magazine) – The tape may not lie, but quite a few stock prices do. Stocks go up (and down) all the time, but not necessarily for the right reasons. Or for sustainable reasons. "Market perception tends to drive stocks in the near term," says Tobias Levkovich, senior U.S. institutional equity strategist for Salomon Smith Barney, "not fundamental reality."

Judging by the prices of some stocks, that's true even now, after Enron, after the Internet bubble, after everything. Which explains why investors continue to have a strong appetite for restaurant stocks, even though the hottest of them--P.F. Chang's China Bistro and gourmet sandwich shop Panera--sell for multiples considered gluttonous in the food industry. And it's why Dell Computer still trades as if profits were jumping more than 35% annually, even though earnings growth has slowed for four quarters in a row.

Which brings us to the most important question of all: How can you tell if a stock price is lying? Often the biggest warning comes from the buzz of misplaced confidence on the Street, like when a company's boosters trot out that old excuse: "The stock is rising--so clearly there's nothing wrong." Oh, please! Stocks often benefit from what you might call "free parking"--that is, mutual funds park their money in a certain hot sector until the managers come up with a better idea. (Restaurant stocks seem to fit the bill these days.) But without the fundamentals holding them there, the fund managers can bail quickly, taking the stock down with them.

Other times they're the flavor of the month with the momentum-investing crowd. The frenzy can be so intense that even otherwise rational investors ignore the danger signs. Take contract manufacturer Act Manufacturing, which in September 2000 zoomed to a high of $72.50--this, even after short-sellers began questioning a loan the company had received from its biggest customer. (Loans from customers are in themselves red flags; they're really bad when a company's operating cash flow is plunging and debt is rising, as was the case with Act.) Act finally ran out of money in December, forcing it to file for bankruptcy. The shares now trade for 27 cents.

Then there's the short-squeeze lie. A squeeze comes when short-sellers, for whatever reason, are forced to rapidly purchase the shares they sold short. That pushes the stock higher--for a while. One stock that benefited from such a squeeze is videogame maker Take 2 Interactive, which actually climbed on Feb. 15 after being halted for nearly a month as auditors combed through its financial statements. The rise, and the stock's subsequent strength, occurred after the company disclosed that it was the subject of a formal investigation by the SEC. The trouble with squeezes is that any rise they cause is artificial, and if fundamentals don't improve, stocks tend to fall harder than they otherwise might have because there's no longer a cushion of buying by the shorts.

Finally, there are times when a stock's price isn't lying, but management thinks it is (because it's trading for such a low price) and therefore announces a stock buyback. Sometimes the bosses even borrow money to purchase their own shares. That's what the management of heavily indebted Warnaco, the underwear maker, did several years ago when its stock was in the 30s. Alas, the buyback didn't work out the way it was supposed to. Last year Warnaco filed for bankruptcy reorganization.

The announcement of a planned buyback, in fact, is often just a lot of talk, with little follow-through. Take 1-800-Contacts. Last April, when its stock was selling for around $18, management authorized the purchase of one million shares. But by the end of the third quarter, the top brass had bought only 22,500 shares. The stock now hovers at $11.

So, why don't investors see some of these stock prices for what they are? Because, says investment psychologist Phil DeMuth, they're longing for a return of the bubble. "You can see the underlying desperation in the way the market rises on any scrap of good news, however far-fetched," says DeMuth. "The market lies because we are lying to ourselves."

Herb Greenberg is a senior columnist for TheStreet.com. Questions? Comments? Contact him by e-mail at herb.greenberg@thestreet.com.