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If enough people decline to invest in evil stocks, the companies whose stocks they are will find it harder to raise money by stock offerings, which will make th
by gjm11 11y ago
If enough people decline to invest in evil stocks, the companies whose stocks they are will find it harder to raise money by stock offerings, which will make them a bit less likely to succeed and therefore also make it harder for them to raise money by selling bonds.
These effects will typically be small, and in the case of a single person declining to invest in evil stocks they will typically be so small that it's obviously correct to ignore them completely. But if the EMH requires them to be zero, I'm not seeing why. Could you explain?
- Eliezer 11y agoBecause if you withdraw your demand for predictable reasons, other market actors say "Oh a predictably underpriced asset" and bid it back up to almost exactly the same price as before.
- gjm11 11y agoAlmost exactly. And, more to the point: the "predictable reasons" involve predicting how many people will be unwilling to hold the assets because of the evil. The more people who are thus unwilling, the higher the predictions will be in future and the lower the price of the asset will go. Your choice whether to hold the assets affects the prediction.