Category: Money Tips Date: 2006-10-17
Soros Investment Tip of the six: To reveal the bias
Since the market expectations and events self-development process is both linked and interact with each other, the market is expected developments that have an important role, as the thing itself an important component, that due to the imperfect nature of awareness generated by the expected deviation greater, then become relatively rational investors find opportunities for profit more likely.
Soros believes that the market volatility, the fact that people with prejudices and shortcomings of the market feel. This feeling is derived from the known behavior of the role of feedback information on the precise little, but a rational analysis of hard data and their own emotional tendencies the product of dual role. Investors in accordance with * the formation of that feeling tendentious view to the sale of investments, counter-productive in the market, but also affect the investor's expectations. Therefore, development of the situation not from the facts to the facts, but from facts to feelings, from the fact that feel.
On the one we have mentioned, for investors who understand the situation of market expectations and the link between self-development trends, and to understand the deviation of the expected impact of the development of the intensity of things is important. Soros, one of the priorities is to explore the theory of misunderstanding or bias in the development role in the process.
Reveal the expected deviation, tracking, with the objective things deviate from the degree of development, on the one hand to capture market opportunities for us to be very helpful, on the other hand, as the market itself to adjust for deviations from the expected, or resonance form of self-promotion, we can adjust their own investment strategy, which has been made to continue to hold positions or lighten up adjustments. 5,6 For example, last month rose CBOT soybean market, mainly due to the U.S. Midwest drought, the market that may result in soybean production cut, in fact the U.S. soybean belt of rainfall distribution is uneven, arid region, primarily Illinois, little impact on the soybean crop, especially in the late rains have been good growing conditions improved, the market speculation on local drought exaggerated, so that the expected yield and the actual formation of large deviation, eventually leading to a retaliatory Quotes decline.
From the above analysis we can see that, when the participants between expectations and reality of bias is very small, the market can self-correct, the effects are negligible, Soros said that the market at this time a quasi-equilibrium. Investment value is not large; while deviation is too large, there are two aspects of performance, one is very different ideas and practical, but the situation remains stable, such as market opening to a lesser extent, the situation can be effectively controlled, there is no sense of Soros and the other is a high degree of market is expected to deviate from the larger developments in the rapidly no time to participate into the response, the situation is unstable, this state of the Soros is extremely beneficial as its favorable planes.
