Ex Stockpickers- Casecollectibles Needs Your Advice

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Ex Stockpickers- Casecollectibles Needs Your Advice

Posted by Matthew Case on March 15, 2010 at 11:16am in Misc

I am writing a 15-20 page term paper over break for my senior seminar economics
class. I decided I am going to write on the topic of behavioral finance.
Including excerpts from

Manias, Panics Crashes- Kindleberger
Fooled by Randomness- Nassim Taleb

When Genius Fail

-I will look at sentiment indicators
-Collapse of the wise men running LTCM
-Capitulation
-Fibonacci
-Buffet comparison between superstar investors and finalists in a national coin
flipping contest.
-Tobin Q- Markets overvalued/undervalued
-John Maynard Keynes beauty contest
-sociological and psychological factors

And my thesis is going to prove that markets act irrational and no mathematical
formula will time business cycles they just happen.

Please give me suggestions to further my hypothesis. Thank you all!

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Replies

GT March 22, 2010 at 5:15pm

I wish you the best of luck. However, I don't agree with your thesis.
March 22, 2010 at 8:47am

Matt, check out the Book Forum. In my post, Random Walk... seems like it could give you some info to support your thesis.
March 19, 2010 at 12:44am

saying tha the market is irrational and saying you cant find ways to predict its movement are not mutually exclusive.

i doubt many ,if any thing, works 100% in the real world. unless they are hyper generalities i.e. the sun rises every day

but many things can work with high accuracy. why do seasonal trades work? why can we use lunar cycles on silver? why does the 4 year cycle low in stocks work so well? What about Andrew Lo's book about technical analysis? im just scratching the surface with these things. but do individuals act irrational when trading? of course. theyre working with imperfect information trying to predict the future. the unknown creates fear in the human mind and fear -- many times -- can lead to irrational actions.

those are my first thoughts. from the standpoint of someone studying something

1. your thesis shouldnt PROVE anything. A thesis is just a starting point, an assumption.
2. to be at all scientific about your study of anything you should always be attempting to prove your thesis wrong as opposed to right. if i have a thesis that fundamental analysis sucks, i wanna try and find all the ways it CAN work. if i find nothing, then i prove my point.
mikey March 17, 2010 at 5:42pm

wow, you might want to query ryan on this one. i'm pretty sure that he would say that the market is predictably cyclical. individual stocks may be irrational, but the market as a whole. don't know about that one. good luck on the paper, mike
chris keorkunian March 15, 2010 at 9:00pm

well take a deep look at the goog/bidu relationship for irrational an no mathematical formula .bidu trades @ well over 82 p/e as opposed to goog's 25p/e then take a look at shares outstanding of the 2........ then take a look at market cap between the 2.............now rolll over to a deal like MA vs. V, talk about another irrational duo. for the first one the bidu/goog phenom is purely nationalistic and sentiment of the people of china, who have branded themselves as being overly optimistic in wanting to achieve more greatness than any other country on earth,yet at any cost. there is a great race going on right now between china and all its counterparts that do business with them. there is no mathematical formula in the relationship in being indebted to china,as do all other countries in the same boat as the U.S.being in debt to them. is goog being asked to leave china a business cycle? i would think not.irrational things happen that have absolutely nothing to do with math,or cycles that effect the markets.there are so many examples.dndn for example,sentiment will move that stock like lightning,if you woke up one morning and bloomberg said they found the cure for breast cancer...no mathematical formula for that. good luck on the paper,you will do well,glad you made it,you remember everyone now dontcha:).chris