Crash headline market stock
A crash has been observed in the stock market in the news as a time frame when there is a great decline in the prices of the shares. These crashes have become common in nature in the financial world. Investors and traders are aware of these set backs. These crashes occur when there is a drastic change in the prices of the shares. Can a reason be traced out for these changes. Do they occur because of the investors confidence, their future insight, etc.
Financial economists are trying to find the answer to this query. Conventional finance and economics believe that the behavior of the investor is responsible for these types of crashes. But the growing numbers of crashes are the evidence that it is not the rational behavior of the investor which is responsible. Even changes in profits and dividends are not solely responsible for the crashes to occur. One of the reasons that the investors do not learn from the errors made by them is because the memory of the human beings has become weak. With the cut throat competition and involvement of investors in various activities leads them in forgetting their past mistakes.
All the crashes in the past may have a common trend. The Mississippi Bubble, 1929 Crash, The South Sea Bubble, The Conglomerate Boom of the 1960, Merger Mania, Junk Bond Boom of 1980, 1987, 1997 etc. But each incident is so different that it is very difficult to come up with a common reason. There had been more number of respondents in the crash of 1987. The reaction was sudden and quick. As one crash sets there is an upcoming of the next crash and investors forget about the first one. New investors have entered the market and are unaware of the crashes in the market.
Sometime there are no reasons for the changes that occur like there is no reason for the increasing craze for mobile phones, gyms, brands etc. People get enthusiastic to get their money invested in the speculative assets. The shift observed in the growth of making stocks, interest towards technology and computers, a rise in mutual funds are some of the examples which indicates that the investors believe in future prospects. The other reason observed is where people are more influenced by the act followed by other people instead of believing in their own thoughts. This concept is also followed in the field of investment. Where a group of investors react positively in the stock of technology it is simultaneously followed by the crowd. Investment news spreads through the news papers, television, magazines etc.
Sometimes people invest their money in the stock market and they fail to take logical decision before doing the same.
Fashion in the market has also developed the investment market to a great extent. Investors are now aware of the latest technology in trading, online trading, various procedures etc. Investors take action with the base even little information. When decisions are taken on the basis of this information and followed by a large group they still result to be weak. The preference for the value sectors and then a shift to the growth sectors are the examples of usage of little information.
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