Friday, August 05, 2011
Perception And Panic
The stock market is a first-rate example of perception. Right now, it sees the world headed for further recession so panic rules traders' actions. Get out, now! Those able to keep their heads during the rush to the exits have an opportunity to do well. The rest of the crowd will suffer loss. When I was in business school, we were taught that markets are rational and reflect all that is known about stocks. It might be rational to bolt suddenly for the door, but there was no news yesterday that was different from the day before. Investor psychology is ruled more by fear and greed than by reason in spite of the mathematical models behind trading now.
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