
influence the market in which they participate, but the market action also influ-
ences the participants’ perceptions. They cannot obtain perfect knowledge of the
market because their thinking is always affecting the market and the market is
affecting their thinking.”
Within this context, it becomes reasonable to regard the efficient market
hypothesis as a working hypothesis regarding primarily rational investors that
typically price securities in a rational fashion. Nevertheless, history seems to
suggest that outbreaks of crowd behavior, typified by bouts of extraordinary
optimism and extraordinary pessimism, can and do affect stock market prices.
The age-old ...