Monday, November 11, 2013

As the 50th anniversary of JFK's assassination approaches, the media is re-telling conspiracy theories and urban myths. What does this relate to markets? For investing, the assumption has been that humans are rational thinkers that assess the worth and utility of their purchases. But that assumption is being pushed aside by the field of behavioral economics. People are not lacking in biases, prejudices, and faulty thinking. I may turn out that a better assumption is that people are story-tellers. Given facts without a narrative, people will construct a story to bind the facts. Some stories are good; many are not. For investing, stories are everywhere and influence market decisions.

No comments:

Post a Comment