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February 22, 2007


Matt Munro

In some circumstances a share price falling is a good thing - selling short, hedge funds etc.


V. quickly

- poor liquidity/inefficient markets will affect not only information flow, but set up an assymetry with insiders and outsiders

- serial correlation, i.e. not everyone has their own opinion, but uses the opinions of others (cf herds)

- errors do not cancel. most research into cognitive biases show that they are pervasive in the same direction.

- curse of knowledge: i.e. more knowledge is not always more helpful.

having said that I agree that in policy making, all these errors exist to a greater extent (greater reliance on experts to guide policy etc.)


...rational investors will eventually make more money than mugs...

Overall they will.

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