The Influence of Emotions and Illusions on the Stock Market

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Finance Nouvelles

Stock Market,Emotions,Illusions

Traders can likely make more money focusing on emotions and illusions rather than on numbers. The madness of crowds can drive stock prices farther and faster (up or down) much more dramatically than earnings can. Let’s look at five possible reasons.

It’s true that fundamentals drive the market in the long term. In the short term, though, pretty much anything can happen.Traders can likely make more money focusing on emotions and illusions rather than on numbers. The madness of crowds can drive stock prices farther and faster (up or down) much more dramatically than earnings can. This can be a gold mine for those focusing on volatility. Psychology courses, in this case, are more important than business classes.

Every time I start believing the efficient market hypothesis, something crazy happens to throw all efficiency out the window. A company will report earnings and its stock will soar (or decline) 40 per cent in a day. If the market was so efficient, how does that even happen? Let’s look at five possible reasons. Some you will have heard of, some, maybe not, but all can be big influences on the market and your investment portfolio.Most investors know about greed, and have probably experienced it themselves. Have you ever let a winning stock run too much, only to hold it into a precipitous decline? We all hav

 

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