BULLS & BEARS: Expect irrational behavior, and learn to profit from it

Investment theories that have dominated thinking in the last half century or so have all stemmed from the efficientmarket hypothesis. These theories assume investors make rational decisions, all financial information is known by everyone, and all markets are efficient because prices are a combination of all those things. But in the last decade or so, behavioralfinance studies have postulated that irrational behavior by investors is actually a strong driving force behind markets-and that irrational behavior can be measured and acted...

 

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