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Citation needed. If that were the case, meme stocks would have been embraced by Wall St instead of heavily shorted (IIRC BB & B was) because a pump and dump doe
by nprateem 3y ago
Citation needed. If that were the case, meme stocks would have been embraced by Wall St instead of heavily shorted (IIRC BB & B was) because a pump and dump doesn't in fact materially improve the underlying business.
- fsckboy 3y agoeconomic and finance theory is based on some clear assumptions. if those assumptions are violated, the theory predicts that the theory cannot predict. "meme stocks" attract a small amount of capital (, large only) to a small number of stocks whose price becomes inflated. Given the nature of memes, this will rarely happen to the whole market. If you owned a broad index fund, your portfolio would inflate along with the meme stocks, and it will deflate along with them later. If it turned out that GameStop was an actual runaway hit, you would participate in it. If it turned out it was just a fad, you participate in that also. There's no place in this story for broad index funds to be a bad idea. Investing directly in the meme stocks carries a huge amount of diversifiable risk, and the market rewards risk, but not diversifiable risk. I said "rarely" to the whole market above because one could consider the .com boom a whole market meme. But you would have been worse off if you stayed out of the market through that bubble.
- nprateem 3y agoEvery theory is based on assumptions. I'm saying the efficient markets hypothesis is less relevant now, not CAPM.