Bear Markets: When finance turns upside down by Kauders David

Author:Kauders, David [Kauders, David]
Language: eng
Format: azw3, epub
Tags: finance, business, money, economics, markets, investment
Publisher: Sparkling Books Limited
Published: 2016-02-28T16:00:00+00:00

Investor behaviour

Experienced investors buy early in the bull market, while the public, whose speculation always marks a market top, invariably buy last. In a bear market commercially minded investors sell early, while the public habitually hold on, refusing to take any loss, hoping for better times.

Private investor participation is high in the excess phase towards the end of every bull market, so the total financial value of trades falls even though the volume (number) of trades rises. Public participation is high again towards the bottom of the bear market, when panic reigns. Obviously, those who bought into the excesses of the bull market and then sell in panic at lower prices, must see their capital damaged, if not destroyed.

Investors are prone to trend following behaviour. At the peak of a rally, few will sell as they believe share prices will go on rising. Of course, if people were selling, there could not be a peak: think about that one! In a trough, buyers are absent and few will commit funds to something that is down and out, especially when their favourite magazine or news source reports how badly it is doing and offers an opinion that worse may follow.

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