丁蟹效应 Adam’s Effect is working again

April 5, 2013 at 3:30 pm Leave a comment

One day after Adam Cheng’s new film started its premiere, Hang Seng Index has dropped significantly.Hongkongers call it 丁蟹效应 Adam’s Effect . It is a mystery why it works frequently as the date of premiere is known in advance. This shows that stock market is inefficient at times as herd behaviour takes precedent. If enough people believes in an effect and takes action, the prophecy will come true. If you want to beat the market, you must be a keen student of the behaviour of the crowd.

As Benjamin Graham said:”In the short term, the stock market is a voting machine” Another famous investor, John Maynard Keynes summed up the 丁蟹效应 Adam’s Effect “It is not a case of choosing those (faces) which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest.We have reached the third degree where we devote our intelligence to anticipating what average opinion expects the average opinion to be.”

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