Sunday, February 20, 2011

Are stock prices determined by facts or human nature? -

Are stock prices determined by facts or human nature? -
"Wall Street has long liked to portray the markets as fiercely efficient, an instantaneous and dispassionate mechanism for valuing companies....But the past decade has taught us that markets can be anything but rational. So today, behaviorists rule: They tell you that investors hold losing stocks not so much because they're undervalued but because it's hard to admit defeat. They note that men tend to trade more aggressively than women....And most people buy stocks because they're going up — not because of earnings prospects.

Which is right? Both camps have good points."

The article goes on to lay out research supporting both sides. A must read for my classes! :)

1 comment: said...

I agree with you that the argument made by either camp has some merit.

But recent history has not been kind to the individual 401k investor and actual returns have averaged only 1.3% according to MSN Money.

Empirical data are even more revealing with all the articles that address Boomers needing to delay retirement because their 401k balance is insufficient.

One other factor that deserves mention, however, is blatant manipulation of the stock market into bull and bear scenarios by insiders and to the benefit of select and lage investors.