RATIONAL MARKETS? The question of just how rational markets are has been debated for decades, and is of great importance to investors. If markets do indeed behave rationally, that is – they move as a logical result of fundamental factors and their changes – then all we have to do is figure out what’s going on with those factors and act accordingly. Now granted, reading the fundamentals such as what’s happening with sales, costs, taxes, currency values, politics and a thousand other things, is incredibly challenging in itself. That’s why some fundamentally-oriented investors (think: Warren Buffet) are stupendously successful, while others are not. But then throw in the possibility that the markets do NOT move rationally, and that makes things even more complicated.
CNN (or was it BBC?) reported last week on an interview with a London School of Economics professor; he explained the results of a recent study showing ... Log in or subscribe to continue reading.
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