The stock market and investment is the market a sideshow

RECENT EVENTS and research findings increasingly suggest that the stock market is not driven solely by news about fundamentals. There seem to be good theoretical as well as empirical reasons to believe that investor sentiment, also referred to as fads and fashions, affects stock prices.

By investor sentiment we mean beliefs held by some investors that cannot be rationally justified.

the stock market and investment is the market a sideshow

Such investors are sometimes referred to as noise traders. To affect prices, these less-than-rational beliefs have to be correlated across noise traders, otherwise trades based on mistaken judgments would cancel out.

The Stock Market and Investment: Is the Market a Sideshow? | Andrei Shleifer

When investor sentiment affects the demand of enough investors, security prices the stock market and investment is the market a sideshow from fundamental values. The debates over market efficiency, exciting as they are, would not be important if the stock market did not affect real economic activity. If the stock market were a sideshow, market inefficiencies would merely redistribute wealth between charles river trading system wiki investors and noise traders.

the stock market and investment is the market a sideshow

But if the stock market influences real economic activity, then the investor sentiment that affects stock prices could also indirectly affect real activity. Developed at and hosted by The College of Information Sciences and Technology.

The Stock Market and Investment: Is the Market a Sideshow? | Brookings Institution

Documents Authors Tables Log in Sign up MetaCart Donate. Advanced Search Include Citations. The stock market and investment: Is the market a sideshow Cached Download Links [www. Save to List Add to Collection Correct Errors Monitor Changes. Brookings Papers on Economic Activity Citations: Abstract RECENT EVENTS and research findings increasingly suggest that the stock market is not driven solely by news about fundamentals.

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