Posted by: Chris | July 19, 2007

Teen Volatility

Just thoughts…

If you’re like my former Finance professor, you believe that the stock market’s movement (and an investor’s response) is based on “perfect information”; that is, if you’re hearing news about a stock, it is highly likely that the stock has already made all adjustments pertaining to the news already, well before the news reached your desk. Kind of like hearing thunder after seeing lightening, the theory of perfect information suggests that news and moves occur simultaneously, but one is a little slower to affect your senses. I see a parallel between the theory of perfect information (in the context of the stock market) and trends among teenagers. In this metaphor, stock news is equivalent to teenage trends, affected stocks are equivalent to teenagers, and the investors are, well, everyone else. The point being, by the time we (adults) begin experiencing trends personally that we have been seeing teenagers experiencing, it’s probably too late-the trend has already done its “damage” and is on its way out. I see Facebook and MySpace as perfect examples of this.

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