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psychological market phenomenon

David Barrett wrote this quite interesting and highly intelligent article in which he tries to explain some aspects of stock market volatility through the psychological phenomenon of the "herd instinct." The question he tries to answer is: "are sound economic aspects responsible for price changes?" If the response is "no," fundamental and technical analysis could be rendered worthless. To come up with an effective explanation for volatility, Barrett compares the influence of the efficient market hypothesis and investor attitudes on price changes and introduces the term "excess volatility." The article is for lay investors as well as market professionals, and offers some insights which are well worth a second thought. I personally am quite impressed by this essay because it's off the mainstream and proves that fundamental and technical analysis cannot be the final solution.

Thu, 16 Mar 2000 07:40:31 -0800

Submitted by: Juergen Lahnsteiner