
How Stories Drive the Stock Market (2016) - caminante
https://www.nytimes.com/2016/01/24/upshot/how-stories-drive-the-stock-market.html
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inputcoffee
Many people know this, but the sub-text/context is that markets are not
efficient.

This is one of the ongoing debates between Schiller and Eugene Fama.

It doesn't follow that we know how to exploit the inefficiency in order to
make money, not that anyone _here_ cares about that sort of base mercenary
thing.

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clock_tower
I got a 16% return on investment from buying Siemens stock two days after
Brexit and selling it four days after Brexit. (Actually three weeks after
Brexit, but the "profits" came from those two days.) On a large scale and over
a long timeframe, the market is very hard to outwit, but it's full of small-
scale and short-term inefficiencies.

~~~
sf_rob
Counterpoint: Efficient market hypothesis folks would claim that the expected
value of all potential Brexit outcomes were already priced into the market
value of Siemens, and that you were just on the right side of a dice roll. If
you "knew" the outcome, then you should have been buying calls for far greater
than a 16% ROI.

I find bubbles to be a better argument against EMH, which EMH advocates claim
don't exist.

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clock_tower
I was going to make a counter-counterpoint, but you're not endorsing EMH in
the first place; so you're the wrong person to argue with.

Bubbles are definitely a counter-argument; I suppose you could argue that they
don't refute a long-term efficient market, but they're certainly a strong
proof against a short-term one.

~~~
monktastic1
You're probably aware of Fama's argument that bubbles are only identifiable in
hindsight, and are just reflecting changes in sentiment given new information.

On the other hand, if you've been right with your bubble predictions often
enough, maybe there's an argument to be made that you _are_ predicting them.
On the third hand, perhaps for every one of you there's another whose
predictions are equally wrong, offsetting you.

I'd be curious to know which it is, but I suppose there's not enough data.

~~~
clock_tower
These are my thoughts as well -- not enough data. I've had really good luck in
2016 (bought into natural gas during the price-of-oil collapse; bought into
safe stocks being panic-sold after Brexit), but I almost feel like I'm living
on borrowed time.

I'm planning on writing a book on my strategies (or maybe seeking backing for
an actively-managed mutual fund?), but only if I can enjoy 10 years and one
full market cycle of success...

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growlix
The associated paper, for those that desire the "full" version:
[http://cowles.yale.edu/sites/default/files/files/pub/d20/d20...](http://cowles.yale.edu/sites/default/files/files/pub/d20/d2069.pdf)

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xchaotic
For every investor who buys based on what they read, there is another who will
buy on fundamental value such as PE ratio, gross margin etc, but if both are
selling then yes stock going down is the right direction

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wespad
Buy on the rumor, sell on the news.

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flint
Ask Schiller if he know anybody who drives a pickup truck.

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burkemw3
2016 parenthetical would be nice on this title

