e., random. The price level revolves around an anchor, supposedly the
fair value.
A market driven by expected capital gains is also "open" in a way
because, much like less reputable pyramid schemes, it depends on new
capital and new investors. As long as new money keeps pouring in,
capital gains expectations are maintained - though not necessarily
realized.
But the amount of new money is finite and, in this sense, this kind of
market is essentially a "closed" one. When sources of funding are
exhausted, the bubble bursts and prices decline precipitously. This is
commonly described as an "asset bubble".
This is why current investment portfolio models (like CAPM) are
unlikely to work. Both shares and markets move in tandem (contagion)
because they are exclusively swayed by the availability of future
buyers at given prices. This renders diversification inefficacious. As
long as considerations of "expected liquidity" do not constitute an
explicit part of income-based models, the market will render them
increasingly irrelevant.
Immortality and Mortality in the Economic Sciences
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
The noted economist, Julian Simon, once quipped: "Because we can expect
future generations to be richer than we are, no matter what we do about
resources, asking us to refrain from using resources now so that future
generations can have them later is like asking the poor to make gifts
to the rich.
Pages:
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142