Timeline for Why can't we all agree to create a self-fulfilling prophecy with regards to the stock market?
Current License: CC BY-SA 3.0
49 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Apr 25, 2019 at 17:27 | history | unprotected | Ben Miller | ||
| Feb 26, 2018 at 13:05 | answer | added | Peter - Reinstate Monica | timeline score: 0 | |
| Feb 26, 2018 at 12:17 | comment | added | user | @Fattie If you feel that the question should be closed, then (realizing that you don't have VTC privileges here) I hope you flagged it for review. | |
| Feb 26, 2018 at 10:01 | comment | added | user207421 | Because if you all do that I will start selling short. | |
| Feb 25, 2018 at 14:20 | comment | added | Xoum | Well, stock market technical analysis (study of patterns in order to predict a price) can be argued to be going in the direction of the self-fullfilling prophecy. If everyone believes that an inverse head-and-shoulders will result in price growth, everyone will contribute to that happening by investing during what seems to be an opportune moment, making the price effectively rise. | |
| Feb 25, 2018 at 13:27 | comment | added | Fattie | This question should be closed as off topic. | |
| Feb 25, 2018 at 13:17 | answer | added | juhist | timeline score: 1 | |
| Feb 24, 2018 at 11:09 | comment | added | PatrickT | We can, we do and the theory is sound. A starting point is a couple of papers by Jean Tirole (Nobel, 2014). The keywords are: intrinsically worthless paper assets, bubbles, transversality conditions, dynamic inefficiency, etc.. | |
| Feb 23, 2018 at 23:46 | comment | added | Eric Lippert | @Michael: Who would accept an asset as collateral that cannot be seized and sold? Remember, the supposition here is that we optimistically hold forever and don't sell. If your new supposition is that there is a class of actors called "bankers" who do sell, then that contradicts the supposition of the question. | |
| Feb 23, 2018 at 23:44 | comment | added | user12515 | @EricLippert Well, I suppose there is always the possibility of borrowing money with the asset as collateral. Of course that can't endly badly... ;-( | |
| Feb 23, 2018 at 23:26 | comment | added | Eric Lippert | Your premise is "we'll all get rich when we hold a stock that always increases in value", just like my acquaintance and his piano. But you only make a profit when you sell. If no one ever sells then how do they actually get rich? | |
| Feb 23, 2018 at 23:23 | comment | added | Eric Lippert | I once knew a guy who bought a really expensive piano. He was a pretty decent pianist, but it was a significant expenditure for him. I asked why he had spent so much, expecting to hear that it was because of some subtle quality, but his answer was "it's an investment; these pianos can gain in value as they get older". Now, leaving aside the fact that this is complete nonsense -- used pianos are not more expensive than new ones -- I asked "so when are you planning on selling it?" "Never! This will become a family heirloom!" Do you see anything wrong with his justification? | |
| Feb 23, 2018 at 20:38 | answer | added | CQM | timeline score: 1 | |
| Feb 23, 2018 at 20:16 | answer | added | sanaris | timeline score: 0 | |
| Feb 23, 2018 at 14:47 | comment | added | Mawg | This sounds like it might work on the B ark | |
| Feb 23, 2018 at 10:59 | comment | added | Raimund Krämer | "Who wins if we're scared of the future?" The one that is rightfully scared. Others, who are wrongfully scared, lose potential gains. | |
| Feb 23, 2018 at 3:41 | answer | added | Phil Frost | timeline score: 5 | |
| Feb 22, 2018 at 23:33 | comment | added | Criticize SE actions means ban | Why can't we all agree to just not use money in the first place? | |
| Feb 22, 2018 at 19:09 | history | protected | Ganesh Sittampalam♦ | ||
| Feb 22, 2018 at 19:09 | answer | added | DonQuiKong | timeline score: 4 | |
| Feb 22, 2018 at 16:13 | comment | added | MD-Tech | an equivalent question to the one in the title is "why can't we all decide on one true religion (or lack there of)"? | |
| Feb 22, 2018 at 16:12 | answer | added | Jeutnarg | timeline score: 3 | |
| Feb 22, 2018 at 15:54 | answer | added | Mike Scott | timeline score: 2 | |
| Feb 22, 2018 at 15:12 | answer | added | Value at Risk | timeline score: 1 | |
| Feb 22, 2018 at 14:08 | comment | added | NoDataDumpNoContribution | Because if everyone is doing the same it pays off not doing it. | |
| Feb 22, 2018 at 13:53 | vote | accept | Will | ||
| Feb 22, 2018 at 12:18 | answer | added | Philipp | timeline score: 63 | |
| Feb 22, 2018 at 10:07 | comment | added | pjc50 | "Game theory" covers situations like this where the more people agree on something, the more potential profit is available for someone who chooses not to agree. As an example of trying to agree that a market should stay within a price band, consider the European Exchange Rate Mechanism (ERM) in the 90s. | |
| Feb 22, 2018 at 8:00 | answer | added | Dmitry Grigoryev | timeline score: 24 | |
| Feb 22, 2018 at 6:18 | answer | added | quid | timeline score: 1 | |
| Feb 22, 2018 at 4:55 | comment | added | user71659 | My understanding is that this did indeed happen with stock options and the Black-Scholes model. US options followed Black-Scholes very closely until the 1987 Black Monday crash. | |
| Feb 22, 2018 at 4:41 | answer | added | user68317 | timeline score: -1 | |
| Feb 22, 2018 at 3:56 | history | tweeted | twitter.com/StackFinance/status/966521956626587650 | ||
| Feb 22, 2018 at 3:43 | comment | added | Hot Licks | This happens all the time. It's called a "bubble". | |
| Feb 22, 2018 at 2:14 | comment | added | Todd Wilcox | If all of humanity could magically agree on any one topic, I would hope we would decide to magically agree on something more significant than the stock market. | |
| Feb 22, 2018 at 1:46 | comment | added | Ex Umbris | Two words: Prisoner’s Dilemma | |
| Feb 21, 2018 at 22:28 | answer | added | partyphysics | timeline score: 5 | |
| Feb 21, 2018 at 22:12 | comment | added | Charles E. Grant | ' a mutually agreed-upon pact that we'll all be optimistic about the future, not sell our stocks' If nobody is selling stocks then nobody can buy them either. If nobody is buying or selling, then the value of a stock is purely speculative. What your suggesting is essentially "Why don't we all pretend we're rich?" The rub comes because everyone eventually want to exchange some portion of our stocks for goods ands services outside of the stock market. | |
| Feb 21, 2018 at 22:09 | comment | added | Michael Hartmann | Because while overall sentiments about the market could be positive, there are individual actors in that market. You buy shares to buy a part of a company. You are relying on that company doing well. If you want to benefit from a positive sentiment, buy an index fund. | |
| Feb 21, 2018 at 21:51 | answer | added | Magua | timeline score: 14 | |
| Feb 21, 2018 at 21:49 | comment | added | ssn | @GeorgeB because at some point you cannot convince a buyer that the stock is still undervalued and eventually no one will buy it (or people could simply not afford the stock in the end). For every time the price go up the people still believing it is undervalued will shrink - eventually no one is left in the category and you have hit the maximum price. | |
| Feb 21, 2018 at 21:49 | answer | added | Ben Miller | timeline score: 109 | |
| Feb 21, 2018 at 21:40 | comment | added | Will | I'm not suggesting anything be regulated or limited. All I'm asking is: if the market seems to be driven so much by the optimism/pessimism of investors, what's to stop everyone from agreeing to act as though we'll be optimistic about the future? It's really a thought experiment and why, in reality, it doesn't play out that way | |
| Feb 21, 2018 at 21:36 | comment | added | Ben Miller | Are you suggesting that we fix/regulate the stock prices? Or are you suggesting that we limit how much stock can be bought/sold? Or are you suggesting something else? | |
| Feb 21, 2018 at 21:35 | comment | added | Will | And would you explain the downvote? | |
| Feb 21, 2018 at 21:34 | comment | added | Will | But what causes the bubble to come crashing down? | |
| Feb 21, 2018 at 21:27 | comment | added | Victor | Because that would cause a bubble which would eventually come crashing down. | |
| Feb 21, 2018 at 21:22 | comment | added | Nuclear Hoagie | Not a full answer, but what happens when that optimism runs smack into the face of reality? When it turned out that Enron was cooking the books and that their business was nowhere near as profitable as they claimed, their stock price crashed, and rightly so. Why would people remain optimistic about such a company, which couldn't even pay the debts that it owed? The economy is a competition, and funneling money into the losers doesn't help in the long term. | |
| Feb 21, 2018 at 21:14 | history | asked | Will | CC BY-SA 3.0 |