In 2003, just before the start of the current rally, suppose someone was to predict a future event with a guarantee that if the predicted event DOES NOT HAPPEN, whatever you lose by taking a call on the prediction will be made good. The prediction was to go thus " Within 5 years the price of crude oil will increase by 650%". Knowing this prediction, what would you do? I would have shorted the stock market with all my might & I would have lost my shirt even though the prediction was accurate.
In an interesting e-book I came accross, the author gives many similar examples to prove that markets are not only unaffected by news, they actually go counter to the news. He shows that markets move fundamentals and not the other way around to prove the validity of the Elliott wave theory. Markets are not influenced by events but by the mood of the crowd and this in turn causes changes in fundamentals to happen. You might like to download this free e-book from the link given. I would like to start a discussion on this topic and any comments would be welcome.Download here
Wednesday, June 18, 2008
WHY MARKETS ARE NOT DRIVEN BY NEWS
Subscribe to:
Post Comments (Atom)
Posts
3 comments:
this is in line with my thinking, that markets are not driven by news but they make news. News is what we hear, markets are what we believe.
Uma, the author talks about sociology and crowd behaviour to justify market rises and falls. It sounds pretty convincing. I'm trying to apply it to our markets and spot examples of such phenomena occuring.
News has and always will drive the market.
Post a Comment