3 ms·
If share prices were determined by a simple mathematical formula based on earnings reports, there'd be very little profit in buying and selling stocks. People (
by stormbrew 13y ago
If share prices were determined by a simple mathematical formula based on earnings reports, there'd be very little profit in buying and selling stocks. People (and organizations) who buy fb believe it is undervalued in the long run. They may be wrong or they may be right, but you can't math that perception out of existence.
- lutusp 13y agoThe tl;dr: anyone who thinks equity valuations are based on rational decision-making are going to be taken to the cleaners.
- stormbrew 13y agoWell, for a certain definition of rational. I think the operative definition in this subject amounts to roughly "not random," though. People (or nowadays trading bots) have reasons, they just aren't necessarily good reasons.
- lutusp 13y ago> Well, for a certain definition of rational. I wasn't going too far afield -- by "rational" I meant on the basis of P/E ratios and other conventional sources of information, rather than mass psychology or hunches. As to trading bots, depending on how much capital they move, they can twist a small market until it cries uncle, and in a matter of minutes in the worst cases. That's rational by some definitions. :)