I think mass thinking is a driving force for stock market, it has nothing to do with economy or GDP.
"I can calculate the motions of heavenly bodies... But not the madness of people!"
Isaac Newton (1642 - 1727)
This is what i think(and Newton too ), what do you think guys?
The price of any stock is sum total of opinions of all market participants.
Price is not about economic conditions or financial status of a company...it is about people's perception of the economic conditions and financial status of a company.
The are always people who a bullish and people who are bearish...markets usually move in direction of the majority opinion - expect at the end of trends.
At the end of a bull market, most people are bullish and thereafter no more new buyers are available to take stocks higher.
Similarly at the end of a bear market, most people are bearish and thereafter no more sellers are there to take prices down.
The price of any stock is sum total of opinions of all market participants.
Price is not about economic conditions or financial status of a company...it is about people's perception of the economic conditions and financial status of a company.
The are always people who a bullish and people who are bearish...markets usually move in direction of the majority opinion - expect at the end of trends.
At the end of a bull market, most people are bullish and thereafter no more new buyers are available to take stocks higher.
Similarly at the end of a bear market, most people are bearish and thereafter no more sellers are there to take prices down.
Didnt know until now as to how the prices of the stock fluctuate..
If this is the case how could a RBI policy result in 1.5 trillion worth of losses on the BSE. Mass Speculation?
If this is the case how could a RBI policy result in 1.5 trillion worth of losses on the BSE. Mass Speculation?
That's what I am saying... RBI credit policy may or may not affect India's growth... but it was the perception that a rate hike would slow growth which led to the sell off.
Remember what happened when the UPA government came to power...people thought their policies would slow down the economy. The indices lost more than 10% in a day.
So were their policies so damaging? No.
It was just the perception that their policies would be detrimental, which scared off the market.
If rates go up why should debt free companies like Infosys sell off... they are mostly dependent on US for their growth..even an Indian slowdown won't affect them much. Sill people sold off all stocks irrespective of whether the individual companies get affected or not. It is mass hysteria at work - what we call herd mentality.
That's what I am saying... RBI credit policy may or may not affect India's growth... but it was the perception that a rate hike would slow growth which led to the sell off.
Remember what happened when the UPA government came to power...people thought their policies would slow down the economy. The indices lost more than 10% in a day.
So were their policies so damaging? No.
It was just the perception that their policies would be detrimental, which scared off the market.
If rates go up why should debt free companies like Infosys sell off... they are mostly dependent on US for their growth..even an Indian slowdown won't affect them much. Sill people sold off all stocks irrespective of whether the individual companies get affected or not. It is mass hysteria at work - what we call herd mentality.
I prefer to call such mass hysteria as "Indian Sheep Tendency"
Anyways its incredible that such hysteria would force the market to slow down and go into heavy losses although the market seems to be recovering now.
Wouldnt it be wiser for everyone to stop speculating "too much" when the market it subject to certain changes. A stock market is volatile as it is and if ppl speculate a little lower as to how the market would slow down and rather focus on driving up the shares it would benefit all right.
Correct me if im wrong, i just got into learning about stocks, forex and all in between from the last few weeks but there have been a time when BSE jumped over the 14K mark right 14.5K+ im not sure about the exacty no of point (the max) it went up to.
How could have that been possible? And now the market jumps to the lowest in over a year only to recover but losses of 150000+ crores is a massive, gigantic and a incredibly huge amount with more than half of that being that of investors at a loss... which i belived could've been saved??
That's what stock markets are all about...there are millions of investors and traders in the market. Each has his/her own individual opinion.
Market prices are sum total of opinions of all market participants. Each day thousands of bulls become bears and thousands of bears become bulls...and thus market prices change depending on number of participants changing sides and also the financial strength of the participants changing sides....
THIS WHOLE POST MADE AN INTERESTING READING. I think without speculators around the stock market would have been a very boring place. Its because of them that we grab our paper every morning to see the market momentum. BUT SPECULATION DOES NEED A HEALTHY HEART-------HA! ha!
Not just a healthy heart it needs a dose of adrenalin to get it to its previous highs 13.5k+ but would that be sustainable in the long run? What do you say alchemist?
Not just a healthy heart it needs a dose of adrenalin to get it to its previous highs 13.5k+ but would that be sustainable in the long run? What do you say alchemist?
IMO, we are in a secular bull run...something that will last for 15-20 years.
US had it's secular bull market in 1980s and 1990s...now it is our turn .
We may see bad periods that last for 6-12 months but the overall direction should be up.
I don't expect 2007 to be an exciting year for equities. Valuations have run ahead of the fundamentals and we need to consolidate or correct a bit now.
I expect Indian markets to end 2007 at same levels as they are now..+- 1000 points on the Sensex.
So we're almost 20-30 years behind US economy.. no worries i guess .. So hopefully we'll have a sustainable growth in the same amount of time? Wats the pros of being at 14K as compared to 12K. Higher returns on investment? or any other too,
So we're almost 20-30 years behind US economy.. no worries i guess .. So hopefully we'll have a sustainable growth in the same amount of time? Wats the pros of being at 14K as compared to 12K. Higher returns on investment? or any other too,
It is not the we are behind or ahead of anyone.
This is the age of globalization - the economies of the world are converging.
What we are seeing is a redistribution of wealth - poorer countries getting richer and richer countries getting poorer.
For decades US and European countries have sold their services and goods to poor countries in Asia and elsewhere and grown richer....now the cycle has turned.
Now slowly they are turning buyers of services and goods from Asian countries.
Africa is still lagging behind...but it is more due to political reasons than economic ones. Africa can also provide cheap labor like Asia, but the political uncertainties in Africa prevent people from investing in it.
Arab countries still control the oil market and thus they continue to grow richer.
Once an alternative of oil is discovered, Arab economies will slow down too.
India will be growing into a economic superpower by 2050... anyone who doesn't invest in Indian stocks for next 25-35 is an idiot.
There may be long corrections in the Indian markets - some lasting 1-2 years, but from now on the long term trend will be more or less up.
Getting back to the point (mass thinking). If I want to make profit from stock market I need to understand mass thinking.I precisely need to know from which point market(or mass thinking) will become bullish or bearish, either with help of Chart or any other tool.
So I need your help to understand this decision making factor.
Getting back to the point (mass thinking). If I want to make profit from stock market I need to understand mass thinking.I precisely need to know from which point market(or mass thinking) will become bullish or bearish, either with help of Chart or any other tool.
So I need your help to understand this decision making factor.
Thanks
Price is the best indicator of what market is thinking at any moment.
If prices are increasing, it means more and more people are becoming bullish.
If prices are decreasing, it means more and more people are becoming bearish.
That's what Technical Analysis is all about - study of price movements to determine market opinion. .
Price is not about economic conditions or financial status of a company...it is about people's perception of the economic conditions and financial status of a company.
That one sentence worth a million dollars.
There is only one teacher who can teach you these priceless things - Experience.
The answers given in this column are fantastic and clarity in concept is just superb.
However I have a question as a layman.
My understanding is that in stock market if somebody is making money it indirectly means that somebody else is losing.
I want to know whether I am right or wrong ?
The answers given in this column are fantastic and clarity in concept is just superb.
However I have a question as a layman.
My understanding is that in stock market if somebody is making money it indirectly means that somebody else is losing.
I want to know whether I am right or wrong ?
Can somebody comment on this ?
rlrao
that's not true.
over the long term if total market value of stocks go up, then on net basis investors make money.
and companies are constantly paying dividends, which is also a gain for stock holders.
in derivatives market, there is always an equal and opposite position.
thus, you can say that in derivatives market, the net gain of the participants is 0. (actually negative if you deduct the transaction costs and taxes).
Indeed, we believe that there are too many myths, misconceptions and false beliefs forcing investors, including professional investors, to lose money. It is not easy to learn the essential truths about the market by tapping into conventional wisdom. The standard theories on finance and markets will not help you much.
That's what I am saying... RBI credit policy may or may not affect India's growth... but it was the perception that a rate hike would slow growth which led to the sell off.
Remember what happened when the UPA government came to power...people thought their policies would slow down the economy. The indices lost more than 10% in a day.
So were their policies so damaging? No.
It was just the perception that their policies would be detrimental, which scared off the market.
If rates go up why should debt free companies like Infosys sell off... they are mostly dependent on US for their growth..even an Indian slowdown won't affect them much. Sill people sold off all stocks irrespective of whether the individual companies get affected or not. It is mass hysteria at work - what we call herd mentality.
Just for removing your confusion. UPA policies are indeed damaging. Just look at the food prices, unemployment etc. Congress works only for itself, i mean only for the party itself. just look at the name of any projects it starts it will have name of nehru/indira/rajeev, none other than that. India would have got freedom at the time of Bhagat Singh's prosecution, but Congress never supported him.
Can the efforts of investor relations (IR) firms affect a company’s stock price?
Quote:
... public relations firms are able to spin non-earnings announcements more than earnings releases. That’s very plausible, because earnings announcements contain precise numbers that can be seen through by analysts, making them difficult to spin, though not for want of trying.
Quote:
A higher proportion of CEO pay in stock and option compensation predicts a higher probability of using an IR firm.
Quote:
... companies prefer to release positive news releases from Monday to Thursday, when investor attention is higher.
Quote:
... a trading strategy around earnings announcements: Buy companies that do not use IR firms and short companies that use IR firms. The logic is simple—since earnings expectations have already been bid up by the IR firms, stock prices of the companies that use them are likely to fall after earnings are declared, while the ones that don’t use IR firms will not see any such impact.
Quote:
... suggest investors do not distinguish between media coverage arising from IR influence and media coverage from general newsworthiness, and are surprised when hard information turns out to be worse than expected. Investors, it appears, can be fooled, but not forever.
Last edited by vasa1 : 30th January 2010 at 08:45 AM.
Hi Vasa,
can you please let me know how do you which company uses the media to generate the positive perception in the market?
Of courseno company will tell this openly..
I guess so.....
I think the author answered that indirectly when he said that "a higher proportion of CEO pay in stock and option compensation predicts a higher probability of using an IR firm".
But, no, I don't have any idea and agree with you that such things won't be publicised.
On a somewhat related point, several companies have an "equity-for-ads/news coverage" deal with one of India's oldest newspapers
I think I know which newspaper you are talking about
They've been bragging about how useful this arrangement is for both sides. A Google search for "private treaty" will throw up the official website and a list of companies.
Stock Market and Mass Thinking
), what do you think guys?
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Stock Market Psychology
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