More about Didier Sornette
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Since it is the actions of investors whose buy and sell decisions move prices up and down, any deviation from a random walk has ultimately to be traced back to the behavior of investors.
The assumption of perfectly rational, maximizing behavior won out until recently in the art of modeling, not because it often reflects reality, but because it was useful.
The price of a stock is strongly influenced by the behavior of the traders in a nontrivial way.
The old Wall Street saying " buy on rumors, sell on the news," is alive and well, as can be seen from numerous sources in the media and the Internet. Rumors can drive herding behavior strongly.
The same basic ingredients are found repeatably: fueled by initially well founded economic fundamentals, investors develop a self-fulfilling enthusiasm by an imitative process or crowd behavior that leads to an unsustainable accelerating overvaluation.
Quote of the day
Thinking is like loving and dying. Each of us must do it for himself.
June 25, 1957
More about Didier Sornette...
Predictions that didn't happen
If it's on the Internet it must be true
Remarkable Last Words (or Near-Last Words)
Philip James Bailey
Letitia Elizabeth Landon