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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: NOW who wrote (37832)11/15/2000 5:24:21 PM
From: GraceZ  Read Replies (5) of 436258
 
So what herd are you following? If people are herd animals than that would include yourself, correct? -g-

The more you know about markets and the way in which markets perform, the more you realize how perfectly irrational they are. You have to start with the premise that most everything that is in the world is worthless and go from there. The market creates a situation where value can be assigned by a large number of participants, any one of them knowing far less than the sum of them. Why would someone pay some outrageous multiple for a stock? Why would anyone pay anything for a stock, in the scheme of things, what the hell is a stock certificate worth anyway? You can site all kinds of metric or analysis but it really has no other value than the one assigned to it by a fluctuating and irrational mass of buyers and sellers.

Crashes and bubbles are a fairly normal occurrence in any market model. Reasons are rounded up later, after the fact. You can create a computer market model where the "agents" operate completely devoid of outside information (news and pumping) and human emotions (fear and greed), one that operates only from historical information (what strategy has worked before) and you will still get crashes and bubbles.
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