Unless otherwise defined, the fact that investors – cannot process all information and – therefore rely on simple anchoring rules when making decisions. – The obvious anchor is the recent evolution of asset prices, such as stock prices. Quotations that rise over a number of years then serve investors as a decisive motive for further decisions. This can lead to a self-reinforcing movement, in the course of which a second round of price increases causes even higher stock prices, which then continues in an infinite loop. – See stock bubble, animal spirits, behavioral finance, bubble, speculative, domino effect, euphoria phase, headline hysteria, herd behavior, information overload, real estate bubble, imitation, informal. – Cf. ECB Monthly Bulletin, November 2008, p. 99 f. (explaining the loop from behavioral finance).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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