Posts filed under “Psychology”
With the stock markets down almost (OMG!) 5 percent from their all-time highs, lots of folks are looking for signs that the bull is dying, if not dead. One of the more portentous omens is the recent decline and volatility of Apple’s stock.
Or so it seems.
For reasons too numerous to list here, Apple captures an enormous amount of mindshare. I find that gratifying, as a fanboy since falling in love with a Mac Classic in 1988. I have jokingly noted that the five major asset classes are stocks, bonds, real estate, commodities and Apple. However, too many people seem to think it is the most important stock in the universe. Even if that were true, that doesn’t help us understand how markets work.
Of course, Apple is important. It had annual sales of $183 billion in the fiscal year that ended last September, almost 100,000 employees, some of the most successful retail stores ever and more than $200 billion in cash and liquid investments. It also is the world’s largest music retailer, reaps almost all of the profits in the mobile phone market and, of course, has a fanatical level of brand loyalty.
Apple’s influence is largely a function of its outsized weighting in various indexes. It is the largest component in the Standard & Poor’s 500 Index at about 3.62 percent. In the Nasdaq 100 Stock Index, it’s even more influential at 12.85 percent — that’s not quite double Microsoft’s weighting, the next biggest component, and almost three times the size of Amazon, at 4.76 percent. Apple ranks seventh in terms of influence in the Dow Jones Industrial Average, which uses a price weighting, meaning that companies with higher absolute share prices (but lower valuations), such as Goldman Sachs and IBM, have a greater impact.
Continues here: As Goes Apple, So Goes the Market?
Today’s column is going to wax a bit philosophical. Stay with me, its worth your effort. You do not really understand Time. By “you” I mean you humans, and by “Time,” I refer to the abstract concept within which all human (excepting Billy Pilgram) structure events in a formal sequence. This has significant ramifications for…Read More
Today’s column is going to wax a bit philosophical. Stay with me; I think it will be worth your effort. You don’t really understand time. By “you” I mean humans in general. This has great significance for investors. They often misapprehend time, are seemingly unaware of its importance, and can’t conceptualize it over the long…Read More
University of Chicago behavioral economist on stock markets, NFL drafts and the importance of trust Douglas Clement | Editor, The Region Published October 3, 2013 | September 2013 issue Interview conducted July 17, 2013 We are rational, self-interested optimizers: Homo economicus. So the neoclassical model of economics has held for over a century. It has been a fruitful…Read More
What do gold prices, a stock-market plunge and a credit crisis have in common? The way investors tend to see them are examples of the “recency effect.“ A brief description first: In human psychology, people who are asked to recall items on a long list tend to have a sharper memory of the items toward…Read More
The Psychology of Risk: The Behavioral Finance Perspective by Victor Ricciardi Goucher College – Department of Business Management Abstract: Since the mid-1970s, hundreds of academic studies have been conducted in risk perception-oriented research within the social sciences (e.g., nonfinancial areas) across various branches of learning. The academic foundation pertaining to the “psychological aspects” of risk…Read More
Most investors are (or at least should be) familiar with the concept of “Home Country Bias” — the natural tendency to be more familiar and comfortable with public companies in your home country. Investors everywhere consistently display this trait, which is in direct conflict with the basic principles of international diversification. A 2014 report by Vanguard found…Read More
The new “World Wealth Report” for 2015 was released last week fromCap Gemini and RBC Wealth Management. The focus is on the population of high net worth individuals, or HNWIs as the report calls them. The report, based on a survey of more than 5,100 wealthy people in 23 major markets, is packed with fascinating data and…Read More