On
Wednesday 8th of February, MPs, members of parliament, voted the
beginning of procedural of the English – EU divorce. A divorce asked by the
public, which emphasises the democratic nature of the party. This democracy though is
coming into contradiction with the voting system since the majority of the
Lords were opposite of leaving EU, only 122 out of 494 agreed to start setting
a deal otherwise it will ultimately leave without it.
The
pound’s value has been fallen however, the Bank of England is estimating an
investments increase for 2017, indicating an inefficient market which is not
influenced or at least immediately by the news released. Probably due to many
information released for different markets, like Brexit, German
and French elections related to EU market, election of Trump related to
American and South American market and ISIS for the Middle East market, have
cancelled each other’s importance and the market has decided to wait. – “Defence
for EMH”
Even if
the stock market advisers have to quickly analyse and quickly act to the new
info released, the events are far beyond the situation leading to random walk
when share prices will be totally independent of the last pieces of news and
there is going to be not systematic correlation between the one movement and
the subsequent ones as Kendal stated. For instance, since summer 2016 all the
political news published are negatively affecting investors’ perception about
market opportunities especially in USA and England. An investor cannot be lead by any rationality, to invest at a specific market. Subsequently, investor's best rationale is to remain the
same currently “safe” shares.
From a
personal perspective, I’m an international student graduating “hopefully” this
July, the principle plan was to stay in UK and have a prestigious, profitable,
managerial job… However, when the Brexit was announced I started making
plans/dreams to move to USA but after Trump’s election I ended up to the
initial plan. The reasons?? Well… I already live here, I speak the language, I
know the culture and “currently” is in a better economic situation than most of
European countries. This is called “compromise” and takes place only when
events are beyond the situation and only if a guaranteed and safe opportunity
comes up further actions will be taken. Even if this was my initial plan and I
decided to make it three years ago at the end became a compromise due to the
increase of its or any other plan’s risk and lack of evidence about their results
in other words uncertainty about future start to exist.
It is the
same philosophy for investors, the majority of them tries to avoid high
risk investments and invests where the rest does, herd instinct. Or they
invest to “unicorn” companies who are expected to raise their value due to
their previous negative returns on assets, previous capitals are raised and
show positive price momentum. However, this contradicts the nature of stock market: the higher the risk taken is the
higher the return will be. If all investors invest to the most
favourable projects then they have to share the returns but if one takes the
risk to invest to something different that individual will join all the
returns.
Lee and Li
argue that companies with “sexy” products can lure people into repeatedly overpaying
for stakes. Robin Greenwood and Andrei Shleifer found that survey-based
measures of expected returns were the exact opposite of “expected” returns
according to the textbooks.
Stock
market is like assignments both of them are dependent to luck, whenever you
expect a good grade you almost fail but when you think you have failed you get
the best mark in class. The variables are who, when and quantity, for share
prices’ return depends on who you invest if it is favourable or not, how many
others have invested at the same project and finally when you do the investment
are there any expected info to be released? Now for the assignment, who is
marking the assignment is the person favourable or not, how many other
assignments have the person read before and finally when is the individual
reading it, was the person in a good or bad mood that day and time?
The
conclusion? Always have the opposite expectation from the desired return, it
works!! J
No comments:
Post a Comment