Economists love to talk about exogenous shocks — events outside of the financial system that cause markets to move. But what if it’s just talk and not real at all?
What Does NOT Move Markets? Examining 8 Claims of Market Efficiency
March 2, 2010 by Leave a Comment
More Credit Default Swaps Means Trouble for European Debt
February 25, 2010 by Leave a Comment
Government debt is no longer just a problem for emerging countries. Portugal, Spain, France and Greece (as we have seen in recent weeks) are living in fear of credit default. Consequently, the value of their credit default swaps is skyrocketing.
What Chinese Malls Tell Us about the Economic Reality
February 22, 2010 by Leave a Comment
Investor expectations are decidely bullish right now, and many people expect an economic turnaround this year. What do the underlying economic conditions suggest? The Chinese mall “The Place” demonstrates the contrast between investor hope and economic reality.
Robert Prechter on Herding and Markets’ “Irony and Paradox”
February 11, 2010 by Leave a Comment
Have you ever watched a dog interact with its owner? The dog repeatedly looks at the owner, taking cues constantly. The owner is the leader, and the dog is a pack animal alert for every cue of what the owner wants it to do. Participants in the stock market are doing something similar. They constantly watch their fellows, alert for every clue of what they will do next. The difference is that there is no leader. The crowd is the perceived leader, but it comprises nothing but followers. When there is no leader to set the course, the herd cues only off itself, making the mood of the herd the only factor directing its actions.
