Where are the people that estimate how much of the population classify into level 1, 2, 3 ... and pick choice of the people in the level with the most people.
Keynesian beauty contest
11–20 of 28 posts
Re: Keynesian beauty contest
#12> This would have people pricing shares not based on what they think their fundamental value is, but rather on what they think everyone else thinks their value is, or what everybody else would predict the average assessment of value is. This is true for people who are buying as speculative investors and focused on short term movements in stock price. However, that's not everyone by a longshot. There are plenty of peo…
It might not be everyone, but I can say for certain that most market participants are NOT value investors.
Re: Keynesian beauty contest
#13> This would have people pricing shares not based on what they think their fundamental value is, but rather on what they think everyone else thinks their value is, or what everybody else would predict the average assessment of value is. This is true for people who are buying as speculative investors and focused on short term movements in stock price. However, that's not everyone by a longshot. There are plenty of peo…
I don't think the insights offered by TII necessarily disagree with the OP. In fact, I'd say the whole concept of Mr Market chimes in quite well. Both imply a policy of wariness when approaching company values.
Re: Keynesian beauty contest
#14Earlier quoted context omitted.
It seems to me that for companies that pay no dividends (and assuming you would have not nearly enough stock to have a vote that matters) there is no value at all in the stock outside of the stock price. The only relevant metric is what other people are willing to pay to buy your stock. Through some mechanism that I can't undertand, the perception of the stock value is still tied to the performance of the company, so…
> for companies that pay no dividends ... there is no value at all in the stock outside of the stock price [but] the perception of the stock value is still tied to the performance of the company Owning a stock is like owning a fraction of a company. The value of stock comes from the following: (1) dividends (that is, a fraction of current profits) (2) assets (that is, a fraction of stuff the company has that could be…
For assets (or future assets), you need to discount them by a probability that the investor could ever actually see that money, either via dividends, or via a 'liquidity event' of one sort or another, since an asset isn't really your asset if you can never touch it. Warren Buffet sees to that by buying controlling stakes in companies, so not only do the companies have assets that could theoretically be liquidated for a profit, but he could actually liquidate the company if he wanted to (or at least, could force it to start selling off assets and returning their value as dividends).
Re: Keynesian beauty contest
#15> This would have people pricing shares not based on what they think their fundamental value is, but rather on what they think everyone else thinks their value is, or what everybody else would predict the average assessment of value is. This is true for people who are buying as speculative investors and focused on short term movements in stock price. However, that's not everyone by a longshot. There are plenty of peo…
It might not be everyone, but I can say for certain that most market participants are NOT value investors.
Where's the evidence?
Re: Keynesian beauty contest
#16Earlier quoted context omitted.
It might not be everyone, but I can say for certain that most market participants are NOT value investors.
Where's the evidence?
Centuries of financial crises and speculative contagions seem to be enough evidence for me.
If majority of market participants were value investors you simply would not have bubbles to the degree that we have seen historically.
Value investors buy assets at a discount to their intrinsic value and they derive that intrinsic value using conservative assumptions on factors such as liquidation value and future cash flows.
If majority of market participants were value investors you would not have had the Dutch Tulip Mania, South Sea Bubble, or more recently the Dot Com Bubble / pre-GFC highs reached in 2006/2007.
Re: Keynesian beauty contest
#17This is the only way I can make sense of the XML frenzy of the late 90s/early 00s.
Did you drop your SOAP?
Re: Keynesian beauty contest
#18Earlier quoted context omitted.
Where's the evidence?
Centuries of financial crises and speculative contagions seem to be enough evidence for me. If majority of market participants were value investors you simply would not have bubbles to the degree that we have seen historically. Value investors buy assets at a discount to their intrinsic value and they derive that intrinsic value using conservative assumptions on factors such as liquidation value and future cash flows…
If majority of market participants were value investors you simply would not have bubbles to the degree that we have seen historically
I'd like to see that quantified.
If 60% of investors were value investors and 40% were speculators, would we still get bubbles? I'm thinking yes.
In reality, most people are in the middle. Looking for value, but still mortal, fallible and susceptible to being persuaded that the flavour of the month really is the next big thing.
Re: Keynesian beauty contest
#19Earlier quoted context omitted.
Where's the evidence?
Centuries of financial crises and speculative contagions seem to be enough evidence for me. If majority of market participants were value investors you simply would not have bubbles to the degree that we have seen historically. Value investors buy assets at a discount to their intrinsic value and they derive that intrinsic value using conservative assumptions on factors such as liquidation value and future cash flows…
> If majority of market participants were value investors you simply would not have bubbles to the degree that we have seen historically.
There is an argument that bubbles are the result of overexpansion of credit. Granting systematic credit is the basic function of central banks.
Re: Keynesian beauty contest
#20Earlier quoted context omitted.
It might not be everyone, but I can say for certain that most market participants are NOT value investors.
Where's the evidence?
The most common explanation given to economic students is theoretical and relevant to basic rationality:
* investors who are speculative have no interest to become long-term focused, while
* a long-term focused investor who, say, owns a great but over-priced stock has interest in selling it expecting to buy it back afterwards, and then bring it to its long-term value;
* similarly, a long-term investor who sees two company would rationally prefer a average but underpriced stock over a great, but already high one if he expects a higher value.
Because short term always precedes long, considering speculation is rational for either type of investor.
You can check chapter 10 and 11 of Keynes' General Theory… if you want a very detailed personal account of those.(Keynes was the best speculator of his time, and make Cambridge King's College immensely rich doing so.)