That theory says share prices move only when investors quietly incorporate new information about the prospects of their investments, whereas it's clear the markets are swinging between blind panic and the thought that maybe it's just a great buying opportunity. The herd can't decide which way to run. How would you feel if you walked into a shoe shop and the manager rushed up and told you to buy extra shoes because prices had skyrocketed? Or if nervous customers warned you not to buy any socks because sock prices had fallen by half?
Thursday, August 30, 2007
Our bouncy market reflects a very moody herd
ECONOMISTS don't like to think about it but, according to conventional theory, events such as the present wild gyrations in financial markets aren't supposed to happen.
That theory says share prices move only when investors quietly incorporate new information about the prospects of their investments, whereas it's clear the markets are swinging between blind panic and the thought that maybe it's just a great buying opportunity. The herd can't decide which way to run. How would you feel if you walked into a shoe shop and the manager rushed up and told you to buy extra shoes because prices had skyrocketed? Or if nervous customers warned you not to buy any socks because sock prices had fallen by half?
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That theory says share prices move only when investors quietly incorporate new information about the prospects of their investments, whereas it's clear the markets are swinging between blind panic and the thought that maybe it's just a great buying opportunity. The herd can't decide which way to run. How would you feel if you walked into a shoe shop and the manager rushed up and told you to buy extra shoes because prices had skyrocketed? Or if nervous customers warned you not to buy any socks because sock prices had fallen by half?
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