BOOTH: MFin 4310-4 2023
Bigger Fool: Momentum & Speculation
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Classical Economics
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Speculation is stabilising
•
Prices go above fundamentals and speculators
short
the stock to bring it down
•
Prices are too low, speculators buy to move the
price up
•
Markets are efficient (more later)!
•
Keynesians (and earlier theorists)
•
Speculators
destabilise prices
as they are
concerned with short run profits
•
Momentum is a short run phenomena
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Long run over reaction
