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James Surowiecki on Stock Market - Dictionary of Arguments

I 320
Stock Market/Information/Communication/Knowledge/Surowiecki: Keynes compares the stock market with a beauty contest in which everyone tries to find out what the average person thinks is what other average people think is beautiful.
Surowiecki: but you have to add that there is only a chance to find out the prettiest girl if some participants really think about which one is the prettiest.
I 321
Behavior: the temptation to behave according to the image of others is almost irresistible. When investors mimic each other, the wisdom of the group as a whole falls. Some information might make things worse. The stock market bubble of the 1990s coincided with an explosive increase in financial news.
I 324
Paul Andreassen showed with students at the MIT (1) how a group with additional current information about stocks performed worse than a peer group without this information.
Andreassen suspects that newspaper reports play up the importance of every single message, which leads to overreactions.
Surowiecki: the problem of the overvaluation of news escalates when it reaches all market participants.

1. Paul Andreassen, »On the Social Psychology of the Stock Market – Aggregate Attributional Effects and the Regressiveness of Predictions«, Journal of Personality and Social Psychology 53/1987, S. 490-498.

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
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Surowi I
James Surowiecki
Die Weisheit der Vielen: Warum Gruppen klüger sind als Einzelne und wie wir das kollektive Wissen für unser wirtschaftliches, soziales und politisches Handeln nutzen können München 2005

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Ed. Martin Schulz, access date 2021-06-20
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