STREET DOGS: Going with the flow
The only thing that makes sense: crowd behaviour
From the CFA Institute: Financial markets are populated by human investors burdened with emotional baggage and associated cognitive errors. In a market context, these errors are amplified because, in the aggregate, they create herding, which leads to wild price swings. Emotional crowds cause extreme volatility of returns in financial markets. Look no further than equity market price bubbles. Financial markets cannot be neatly packed into a set of mathematical equations. The only way to make sense of them is to view them in all their disorder. We will never understand why markets and their underlying securities move the way they do over shorter time periods. So if we’re asked why the market, a stock or other security moved the way it did, the honest answer is almost always, "I have no idea." Yet investors and journalists always ascribe a rationale to market movements even when the implied causality is chimerical. Investors are not rational and markets are not informationally efficien...
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