[ExI] Psychology of markets explanations

BillK pharos at gmail.com
Sat Jun 6 12:46:40 UTC 2009

On 6/5/09, Stathis Papaioannou wrote:
> In general it is what we see, but it also depends on the population.
>  The aforementioned Japanese seem constitutionally less inclined to
>  borrow money for consumer spending than Americans are, no matter how
>  cheap and easy it is to get a loan.

News just in -

Poking Holes in a Theory on Markets
By JOE NOCERA      Published: June 5, 2009

You know what the efficient market hypothesis is, don’t you? It’s a
theory that grew out of the University of Chicago’s finance
department, and long held sway in academic circles, that the stock
market can’t be beaten on any consistent basis because all available
information is already built into stock prices. The stock market, in
other words, is rational.

In the last decade, the efficient market hypothesis, which had been
near dogma since the early 1970s, has taken some serious body blows.
First came the rise of the behavioral economists, like Richard H.
Thaler at the University of Chicago and Robert J. Shiller at Yale, who
convincingly showed that mass psychology, herd behavior and the like
can have an enormous effect on stock prices — meaning that perhaps the
market isn’t quite so efficient after all. Then came a bit more
tangible proof: the dot-com bubble, quickly followed by the housing
bubble. Quod erat demonstrandum.


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