What kind of market is the financial market?

The financial market itself is a game between people who mix rational and emotional factors. They all make their own buying or selling decisions under the assumption of what the market is like, in the hope of winning money.

The so-called "market" is what everyone else thinks except me.

If there are too many idiots in a certain period, or the government devalues ​​the currency severely, forcing ordinary people who don’t understand finance to enter the capital market to speculate and become stupid, then it will push the market to an unbelievable level. high.

Take our big A-shares as an example. The big bull market in 2007 and the big bull market in 2015 were, in the final analysis, the result of too many "noobs" entering the market who didn't understand the stock market at all. So, who can win the "bonus" of the big game of the financial market?

The answer is: he himself is rational, but he can roughly estimate the degree of market irrationality!

In other words, in the financial market, there are indeed some people who are stupid, but most people are not stupider than you. You have to consider that most people are not stupider than you, and then consider that there are indeed some people. Be stupid, then you may win money!

Guess the average 2/3 game in the Yale University "Game Theory" class (everyone writes down a number within 1-100 on paper, then counts these numbers, and calculates the average of these numbers-the so-called The "winner" is the friend whose number is closest to 2/3 of the average), most people can exclude the numbers above 67, and the number above 45 can be considered Numbers should be excluded as the second level, and numbers above 30 should be excluded as the third level. In the actual financial market, there are very few people who can achieve these three rounds of thinking...

The most important thing is - round after round of logical reasoning in this game is the same principle, but round after round of deep thinking in the financial market is not necessarily the same principle, which is more testable One considers the depth of the market .

It is conceivable that if every round of the game is played by people who have played the game and new players, because more and more people either understand it by themselves or understand it under the guidance of others, then the overall It is said that this number will get closer and closer to the most rational answer "1".

We have to admit that if we keep playing the same game, more people will become relatively more rational and better at playing.

Just as after a big bubble bursts in the financial market, it is often difficult to have another big bubble in a short period of time, because the parties involved in the game have understood the essence of the game and become smarter and more rational (this is usually They are all the experience of losing real money and losing money), and the funds of new investors are not enough to push the market to another bubble...

However, regardless of the game or the financial market, the nature of the game itself will not change in any way. This is human nature!

As Yale played the game round after round in its own class, the average went from 28 to 13.3, and the winner's number dropped from 18 to 9, despite getting closer to the rational best answer of "1," But as long as there is a new participant who doesn't understand the rules or understand the essence of the game, then the average number of the game in reality cannot be 1.

Take the A-share market in the past two years as an example: After the outbreak of the epidemic in 2020, everyone has been bullish on the stock market. The Shanghai and Shenzhen 300 Index that came out of the game was 3,500 points at the beginning. Everyone guessed that others were bullish. Rising all the way, from 4000 points to 4500 points, and even close to 6000 points by the beginning of 2021...

Then, from the end of 2021, everyone began to speculate that others were bearish. Therefore, the CSI 300 Index plummeted from 5000 points, but everyone thought it would continue to plummet, so the stock index continued to fall until November 2022 The CSI 300 index of our big A shares should have been around 3500 points...
Maybe on the premise that everyone is rational enough, the Shanghai and Shenzhen 300 index of our big A shares should have been around 4500 points. However, it is useless to assume that everyone is rational...
just In other words, if there are more and more rational people in the market, it will affect the stock market itself to tend to a reasonable level, or closer to a reasonable level. Unless, unless there are many new investors who have no investment experience, they are the so-called "new leeks".