emotions and mispricing in the market

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1、P1:OTA/XYZP2:ABCc17JWBT347/MckinseyMay26,201016:31PrinterName:Hamilton17EmotionsandMispricingintheMarketChapters15and16setouttheevidencethatstockmarketvaluationscorrectlyreflectunderlyingeconomicfundamentalsinalmostallcasesandnearlyallthetime.Butwhataboutthoseepisodeswhenmarketsappeartopartcomp

2、anywithreality?Weagreewithproponentsofbehavioralfinancethatemotionscangetthebetterofinvestorsatcertainmoments.Butturningtotheevidenceagain,wefindsuchmomentsdonotlastverylongandrarelyinvolvemorethanafewcompaniesorsectors.FortheU.S.andEuropeanstockmarkets,wefindthefollowingpatterns:
Individualcompa

3、nysharepricesdeviatesignificantlyfromthecom-pany’sfundamentalvalueonlyinrarecircumstances—typicallywhenbarrierstotrading,suchastoolimitedafreefloatofshares,preventrationalinvestorsfrommovingintocorrecttheprice.
Market-widepricedeviationsfromfundamentalvaluations,asinthedot-comboomofthelate1990so

4、rthesoaringpricestriggeredbyexpec-tationsofunsustainablecorporateprofitsin2007,areevenlessfrequent,althoughtheymayappeartobebecomingmoreso.
Inthevastmajorityofcases,pricedeviationsfromfundamentalsaretemporary.Market-widedeviationsaretypicallycorrectedwithinthreeyears.Company-specificdeviationsus

5、uallylastonlyaslongasthebar-rierspreventingapricecorrection.Althoughrandomdeviationsfromintrinsicvaluecanoccurinstocksfromtimetotime,managersarestillbestoffassumingthatthemarketwillcor-rectlyreflecttheintrinsicvalueoftheirdecisions.Whatmanagersmustbealertto,however,aresystematicdeviationsfromin

6、trinsicvalue.Thesemay381P1:OTA/XYZP2:ABCc17JWBT347/MckinseyMay26,201016:31PrinterName:Hamilton382EMOTIONSANDMISPRICINGINTHEMARKETaffectstrategicfinancialdecisions,suchaswhetherandwhentoissuenewsharesorpursueacquisitions.Managerswhounderstandthepotentialcausesofsuchdeviationsmayexploitthemtocrea

7、temorelong-termvaluefortheirshareholders(seeChapter18).EMOTIONSRARELYDRIVESTOCKMARKETVALUESSincetheseminalarticlebyWernerDeBondtandRichardThalerin1985,1somefinanceacademicsandpractitionershavearguedthatstockmarketsarenotefficient—thatthey