•
Most simply formulated, it is a paradox – the paradox of behavior which is at one and the same time self-perpetuating and self-defeating! …Common sense holds that a normal, sensible man, or even a beast to the limits of his intelligence, will weigh and balance the consequences of his acts: if the net effect…
•
“Croesesus crossing the Halys will destroy a great empire” – Delphic Oracle, quoted in Niederhoffer’s Education of a Speculator The beauty of the above quote is that it sounds great but never really specifies which empire will fall. *** While Victor Niederhoffer might ultimately be remembered for blowing up spectacularly on multiple occasions, he…
•
When we were in grad school, my wife (then girlfriend) was involved in research where they would use music to induce mood states including sadness and elation over short periods of time. Then, once they had induced mood, they would ask a bunch of questions about cognitions or whatever. We used to laugh about…
•
Over on StockTwits this morning I am observing a bunch of comments from traders saying that they “sold this rally too soon.” This is a significant collective expression. There are two important psychological processes occurring here which I will briefly outline for the sake of awareness raising among traders. These are loss aversion and…
•
(This was originally published on Real Money on 03/06/09 @ 11:32PM EST) I am reading with interest the comments here on the Real Money Columnist Conversation regarding the psychology of the market now. I think that the tension here is a reflection of the tension among market participants in general. Traders have been in…
•
Before I get into the heart of a comprehensive model of market participant behavior, I would like to put the concept of prescription into context amid economic theory. Traditional economists offer normative theories. That is, they model how markets ought to behave in a world where all the participants are rational actors and always…
•
In a recent article in the Seattle Times, Teri Cettina interviewed Dan Ariely about his new book entitled Predictably Irrational. Airely is a behavioral economist at MIT and Duke who has done wonderful research which helps to describe the ways in which people behave irrationally especially where money is involved. I love this type…
•
The simple truth is that measuring human emotion is extremely difficult. Expert researchers have been working at it since before the phrenologists felt the bumps on one’s head to divine personality. Its so difficult to do because emotions are super complex, intertwined dynamically with other modes of experience and remote to direct observation. So…
•
I had a great breakfast this morning with Lindzon and Mick from Research Edge. Mick brought up the idea of centralizing accountability which I loved and which dovetails nicely with my piece on StockTwits and transparency. The idea is that up unitl now we have had all of these market pundits squawking whatever they…
•
Since the end of World War II, the U.S. has arguably experienced the greatest era of increasing prosperity in the history of nations. From 1945 to 2001 U.S. GDP and the Dow Jones Industrial Average both increased approximately 50 fold. At the same time, the abundance of and access to resources also increased exponentially.…