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.
