Mainstream media often associates stock market ups and downs based on news and events. Often people think that the markets are rational and investors are believed to react to the news around them.
We have a different opinion:
Contrasting Models of Finance
Efficient Market Hypothesis (EMH)
1 Objective, conscious, rational decisions to maximize utility determine financial values. 2. Financial markets tend toward equilibrium and revert to the mean. 3. Investors in financial markets typically use information to reason. 4. Investors’ decisions are based on knowledge and certainty.
5. Exogenous variables determine most investment decisions.
6. Financial prices derive from individual decisions about value.
7. Financial prices are random.
8. Financial prices are unpredictable.
9. Changing events presage changes in the values of associated financial instruments.
10. Economic principles govern finance.
Socionomic Theory of Finance (STF)
1. Subjective, unconscious, pre-rational impulses to herd determine financial values.
2. Financial markets are dynamic and do not revert to anything. 3. Investors in financial markets typically use information to rationalize emotional imperatives.
4. Investors’ decisions are fraught with ignorance and uncertainty. 5. Endogenous social processes determine most investment decisions.
6. Financial prices derive from trends in social mood.
7. Financial prices adhere to an organizing principle at the aggregate level.
8. Financial prices are probabilistically predictable.
9. Changing values of financial instruments presage changes in associated events.
10. Socionomic principles govern finance.
Explained in this eye opening presentation in IFTA London – by Robert R Prechter – Socionomic Theory: An Alternative to EMH & a Foundation for TA
Want to learn more?
Two Free Chapters of Robert Prechter’s New Book
There’s a monster lurking beneath the investment hedges today, and no one is talking about it. It is so stealthy and so big that it will ruin 90%+ of all portfolios.
What is it?
It’s “conventional wisdom.”
It has happened again and again. For example: Imagine the deadliest terrorist attack in U.S. history happened tomorrow. Would you short the stock market? What if North America suffered its biggest blackout ever? Or what if the president got shot? Just about any investor would assume these history-turning developments would send stock prices spiraling.
Any investor who followed conventional wisdom, that is.
Yet the market screamed higher in the weeks after 9/11. It screamed higher after the blackout of 2003. It even screamed higher after President John F. Kennedy was assassinated. Anyone who followed “conventional wisdom” and shorted the markets got crushed.
A new book by market legend Robert Prechter, The Socionomic Theory of Finance, is a bold challenge to these widely accepted financial conventions. Thirteen years in the making, STF uses empirical historical studies to expose layers of erroneous thinking and to offer a new approach based on how the markets actually work. The book is jaw-dropping and, at times, an uncomfortable read. It is acclaimed by academics, practitioners and investors who realize that current conventional wisdom is broken and needs to be replaced.
We’ve worked with our friends at Elliott Wave International to share some of Prechter’s fascinating book with you — FREE. For a limited-time, we are going to share two full chapters with you and you can judge for yourself if it lives up to the hype.
These two chapters will open your eyes and offer a clear perspective that everyone can understand. And it’s FREE for a limited time.