Market anomalies...
... or when investors make psychological mistakes.
What the great stock market crash of 1929 and the financial crisis of 2008 have in common are the anomalies or market inefficiencies that repeatedly occur on the financial market.
This happens when investors make psychological mistakes mistakes. As a result, the prices of securities deviate or deviate extremely from their fundamental values or "true" values.
There have been repeated cases of severe exaggerations in both directions, e.g. the corona crash, where everything was sold in panic at the beginning, only for everything to start rising again in a relatively short time.
Also the dotcom bubble from 1995 to 2000, the real estate bubble in 2007, the tulip crisis ect ect.
The GameStop meme share is also a very good example of this. Predominantly young speculators tried to artificially drive up the value of the share via the online platform Reddit in order to damage the hedge funds. (You may or may not approve of this. It is also hard not to think that a few people have made massive profits from this speculation).
The research itself casts doubt on the efficiency of the capital market, as there is also a great deal of scientific research showing the anomaly, which is not compatible with an efficient market.
For example, at the end of the 90s, companies were able to increase their profits simply by changing their name to "XY.com" alone, companies were able to increase their share prices on the stock markets by an average of 70% without changing their strategies or the actual business model.
All it took was a "hip name" that suited the Internet theme of the time.
Investors assumed inflated profit expectations, but ignored the figures in the annual financial statements and the company valuations. The media landscape also played a major role, as it fueled the euphoria. (Input: If, for example, the Bild newspaper writes that you have to buy now, it would certainly be better for investors to leave the trading floor.)
After the dotcom bubble burst, many of these companies were able to enjoy massive price gains again by "deleting" the .com from their names.
In recent decades, it has also been noted that there is a "Monday effect" in the stock market.
Just as we take longer to start the new week after an intensive weekend, the same can also be observed on the stock market.
The daily return tends to be lower on Mondays than on other days of the week.
Prices can also rise after a surprising victory for the national team at a tournament.
"We" investors simply do not behave rationally, but let ourselves be guided by emotions, hours of sunshine and temperature.
Edward Saunders Jr. showed in one of his studies that when it was 100% cloudy, profits were significantly below average and when it was sunny, they were clearly above average. He used the New York Stock Exchange from 1927 - 1989. (https://www.jstor.org/stable/2117565)
Note: A good salesperson learns to inquire about the weather when making a telephone call, for example. This enables him to assess the possible emotional state of the person and thus better estimate his chances of success.
Even the time change has an effect on returns. This "disruption" of the biological rhythm or our daily routine causes us to have a kind of "mini-jetlag".
This can result in anxiety, impatience or even carelessness, which in turn contributes to emotional trading on the markets. This was also confirmed by studies in 2000: (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=208623) by Kamstra, Kramer and Levi
Psychological investor errors are held responsible for many of these anomalies.
In my next posts, I will try to point out a few psychological investment mistakes and present the corresponding "solutions".
The ownership effector for no money in the world.
#psychologie
#psychologyinfinance
#anleger
