The assumption that small investors always decide emotionally and therefore act at the wrong times on the stock market – and especially when buying stocks. Therefore, if – many retail investors buy when prices are rising, this is seen as a sign of market weakness; – one should therefore sell the corresponding security as quickly as possible now. – If, however, many small investors sell when prices are falling, – then this is regarded as a signal to enter this market or this security (theory of technical analysis based on the assumption that odd-lotters [= small investors who deal in fewer than 100 shares at a time] are poorly informed and have a low risk tolerance. Small individual investors, therefore, are always wrong, and it is a good idea to trade contrary to their trading patterns; a good time to buy is when they are selling). – However, this assumption has not been empirically proven, especially since financial journalists, banks and stockbrokers – not least as a result of public pressure – generally give good advice to small investors in particular. – See stock market investors, chase winners, euphoria phase, herd behavior, hindsight, short-sightedness, milkmaid bull market, noise traders, overtrading, scalpers.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/