What does Warren Buffett says in this article here
"In the short term the market is a popularity contest; in the long term it is a weighing machine."
What is the analogy with popularity contest and weighing machine
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In the short term the market is a popularity contest
In the short run which in value investing time can extend even to many years, an equity is subject to the vicissitudes of the whims by every scale of panic and elation.
This can be seen by examining the daily chart of any large cap equity in the US. Even such large holdings can be affected by any set of fear and greed in the market and in the subset of traders trading the equity.
Quantitatively, this statement means that equities experience high variance in the short rurn.
in the long term [the stock market] is a weighing machine
In the long run which in value investing time can extend to even multiple decades, an equity is more or less subject only to the variance of the underlying value.
This can be seen by examining the annual chart of even the smallest cap equities over decades. An equity over such time periods is almost exclusively affected by its changes in value.
Quantitatively, this statement means that equities experience low variance in the long run.