This is an awesome topic for further study:
- Stockholder Psychology
- Stakeholder Psychology.
- Investor Psychology
- Lender Psychology
QUESTIONS:
- How do stockholders behave under pressure?
- How do stakeholders behave under pressure?
- How do investors and lenders behave under pressure?
- What is the usual pattern?
- What is an abnormal pattern?
- Can these patterns be predicted?
- Can money be made out of this knowledge?
From the link: http://www.investmentpostcards.com/2008/08/29/investor-psychology-cycle-%e2%80%93-are-we-there-yet/#ixzz2EK8r6B7m
- Contempt: According to the cycle, a bull market typically starts when a market is at a low and investors scorn stocks.
- Doubt and suspicion: They try to decide whether what they have left should be invested in a safe haven such as a money market fund. They have burnt their fingers with stocks and vow never to invest again.
- Caution: The market then gradually starts showing signs of recovery. Most investors remain cautious, but prudent investors are already drooling at the possibility of profit.
- Confidence: As stock prices rise, investors’ feeling of mistrust changes to confidence and ultimately to enthusiasm. Most investors start buying their stocks at this stage.
- Enthusiasm: During the enthusiasm stage, prudent investors are already starting to take profits and get out of the stock market, because they realise that the bull market is coming to an end.
- Greed and conviction: Investors’ enthusiasm is followed by greed, which is often accompanied by numerous IPOs on the stock market.
- Indifference: Investors look beyond unsustainably high price-earnings ratios.
- Dismissal: As the market declines, investors show a lack or interest that quickly turns to dismissal.
- Denial: Then they reach the denial stage where they regularly affirm their belief that the market definitely cannot fall any further.
- Fear, panic and contempt: Concern starts to take a hold and fear, panic and despair soon follow. Investors again start scorning the market and once again they vow never to invest in stocks again.
Will post more details soon...
Cheers,
Gerry.
2 comments:
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