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Oct 142013
 

A Press Release dated October 14, 2013 on identified “The Official Web Site of the Nobel Prize” started out the following way (MLA style: “The Prize in Economic Sciences 2013 – Press Release”. Nobelprize.org. Nobel Media AB 2013. Web. 14 Oct 2013. https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2013/press.html; retrieved 10-14-2013) :

The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2013 to

Eugene F. Fama
University of Chicago, IL, USA

Lars Peter Hansen
University of Chicago, IL, USA

and

Robert J. Shiller
Yale University, New Haven, CT, USA

‘for their empirical analysis of asset prices’.

 

Trendspotting in asset markets

There is no way to predict the price of stocks and bonds over the next few days or weeks. But it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years. These findings, which might seem both surprising and contradictory, were made and analyzed by this year’s Laureates, Eugene Fama, Lars Peter Hansen and Robert Shiller.”

The article ended in the following way:

“The Laureates have laid the foundation for the current understanding of asset prices. It relies in part on fluctuations in risk and risk attitudes, and in part on behavioral biases and market frictions.”

This Author has been following such identified trends for over 15 years. One aspect that seems or would seem particularly important (the author is currently unsure if any of the 2013 Economic Laureates have addressed this aspect) to many people is that the individual investor who does not have a high amount of assets often does not or is not able to keep investments over three to five years that are depreciating in value/losing money and that such individual investors may often sell such securities/takes losses in such assets even when it is believed the security will appreciate in value over time. Moreover, hedge funds, for example, can and often do take advantage of this apparent fear and inability to absorb such losses by such individual investors. Security traders such as those working for hedge funds short such identified depreciating securities. Shorting securities by such institutional investors/hedge funds can increase the frequency, intensity, and duration of losses that the individual investor incurs (who often does not have a high amount of assets) due to selling such securities (often as a result of acute fear).

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Louis DeCola, Jr.  © 2013                                    The Hygiology Post ®