Grasping Reality with Both Hands: The Semi-Daily Journal of Economist Brad DeLong: Monkeys Trade Assets IGood traders in these experiment pay attention to fundamentals, but the best traders play the chumps. They wait until "Joe Sixpack" decides to start buying shares. Then they bail.
... In fact, the people who make the most money in these experiments aren’t the ones who stick to fundamentals. They’re the speculators who buy a lot at the beginning and sell midway through, taking advantage of “momentum traders” who jump in when the market is going up, don’t sell until it’s going down, and wind up with the least money at the end. (“I have a lot of relatives and friends who are momentum traders,” comments Noussair.) Bubbles start to pop when the momentum traders run out of money and can no longer push prices up..."
Incidentally, in my experience, "Joe Sixpack" is a physician. When surgeons start trading stock tips with the medical types, the chumps are in position. It's time to exit gracefully.
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