Beware Mr Market

January 31, 2011

Thinking of the market as having a personality can be fun and educational.  But it has a dark side as well.

Benjamin Graham

The idea of Mr Market was created by Benjamin Graham as a way of conveying the wisdom of fundamental analysis.

Graham’s intentions were to make people act more rationally.  Ironically, thinking of Mr Market may encourage people to act less rationally.

Intentionality

Markets may or may not have streaks but Mr Market will be held to have intentions.  We humans seem to think streaks will continue when we anthropomorphize the process.  Several experiments along these lines are reported in The intentional mind and the hot hand: Perceiving intentions makes streaks seem likely to continue.

Latest posts

Leave a Reply

Related posts

  • Revised market prediction distributions

    January 4, 2011

    This provides revised plots of the prediction distributions published yesterday.  The previous plots of prediction distributions should be ignored -- they are not doing as advertised. We show the [...]

  • Creating prediction distributions

    January 4, 2011

    Here we give details and code for the prediction distributions exhibited in yesterday's blog post "Tis the season to predict". [Revision: There was a problem with the plots published [...]

  • Tis the season to predict

    January 3, 2011

    I predict there will be a lot of predictions of markets for the coming year.  Here is a calibration of such predictions. We show the prediction distribution of levels [...]