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What Governs the Stock Market: Rationality, Irrationality, or Something in-Between?
Discover the Answer in the Latest Elliott Wave Theorist

By Bob Stokes
Thu, 21 Apr 2011 17:30:00 ET
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Which of the choices below is correct?
 
a) Investors always price the market rationally.
b) Investors price the market rationally most of the time but are irrational sometimes (during bubbles and crashes).
c) Investors price the market irrationally most of the time, but are occasionally rational.
d) Investors always price the market unconsciously and irrationally.
 
The correct answer jumps off the page in Robert Prechter's latest Elliott Wave Theorist:
He explains the crucial differences between the Efficient Market Hypothesis, behavioral economics, "bubble theories" and socionomics.
 
Read it and you'll understand those differences, and why only one of these models can forecast markets.
 
Prechter also challenges a common notion about risk-taking in the market:
 
"Whether buying or selling, investors are unconsciously perceiving less risk...in neither case is there any thought of taking on risk, rationally or otherwise."
 
But aren't investors consciously taking on more risk by "deciding that the gamble of buying high--to sell even higher--is worth it?" Prechter's answer to this question will likely surprise you. You'll never hear the phrase "risk-appetite" in the same way again.
 
As you read this latest issue of the Elliott Wave Theorist, you'll also learn about the:
 
  • 10 major differences between the finance models of Efficient Market Hypothesis and Socionomics.
  • Surprising psychological factor that really drives market bubbles and crashes.
  • One professional group that engages in groupthink more than any other (and why).
  • The stunning difference between the returns of a recent decade's best performing stock fund and that fund's investors, and why the gap was so great.
  • Why market analysis based on "objective pricing" is doomed to fail.
  • The secret of why most investors don't even make money in a bull market.
  • The "constant" in financial markets which serves as "the basis for the vast bulk of commentary justifying buying or selling financial assets."
  • An answer to the question: Can financial bubbles be forecast?
  • The evidence in 4 eye-opening charts which debunks the myth that dividends, earnings, book values, and the bond/stock yield spread determine stock market pricing.
 
The April Theorist also shows indisputable evidence of investor herding in 5 revealing charts, and explains how herding shatters the notion of "rational" market pricing.
 

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