Re: Two financial thought contagion papers now online

Date: Fri Feb 22 2002 - 22:56:52 GMT

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    Subject: Re: Two financial thought contagion papers now online
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    In a message dated 2/22/2002 9:17:19 AM Central Standard Time,
    Grant Callaghan <> writes:

    > It might be interesting to compare stock market bubbles with the behavior
    > of
    > buying lottery tickets in a progressive lottery. The chances of winning
    > Calif. are 14 million to one, no matter what the payoff of a winning
    > Newspapers often print the odds and comapre the chances of winning with
    > getting struck by lightning or the planet being struck by a meteor. When
    > the lottery payout approached 200 million last week, people in some places
    > were line up around the block to buy a ticket. Automatic ticket
    > ran out of tickets. The hysteria produced three winners who won 64
    > each.
    > I believe the forces that produce stock market bubbles operate in a
    > way. No matter how many warnings they get of the danger of buying into a
    > bubble, even supposedly rational stock brokers are overtaken with euphoria
    > and computer programmers who work in the field of logic buy into the idea
    > getting rich by taking stock options instead of money.
    > So why do normally rational people make irrational decisions in the face
    > advice to the contrary and end up losing most or all of their accumulated
    > wealth? Is it similar to the idea of a guaranteed place in heaven? Or is
    > it something like a herd instinct that causes people to stampede for the
    > exits at the shout of fire?

    Hi Grant.

    There do seem to be some similarities between the spread of
    news about soaring lottery prizes and soaring stocks, though
    the profit potentials differ.

    People often have more social motives for talking about the
    expensive stocks they own than the cheap stocks they own.
    For example, someone who just bought 100 shares of (Nasdaq: TCGN) for $100 may feel
    more inclined to talk about those high-priced shares than
    someone else who earlier had just bought 1000 shares at
    $10.* Men trying to impress women, for instance, may be
    more inclined to mention the expensive shares they own
    rather than the cheap shares. People in the media also
    have more reasons to talk about the high-flying shares,
    even when they do not have hidden vested interests.

    Given what you say above, you will probably get a visual
    kick++ from reading the papers. (Others have found the
    papers entertaining as well as interesting.)

    *Securities used for illustration purposes only. Consult your
    broker for "real" securities. As always, "Watch out!" (TM)
    for Enronism and information warfare in business and
    science. The stock market is risky and not suitable to all

    In a message dated 2/22/2002 1:52:14 PM Central Standard
    Time, writes:

    > Thought contagnions and memetic influence is no mere
    > coincidence in the stock market. Smart investors use it to
    > influence the market for their own profit.

    Yes, that is one of the things I discuss. Nearly all investors
    have motives for talking up the shares they already own. Still,
    there are interesting things to learn from analyzing the
    mass contagion effects of even deliberate profit-motivated

    With the Internet stocks, much attention has gone to the big
    players such as analysts and broadcasters. However, it is
    worth noting that in the 11 months before Henry Blodget
    had made is first projection for, the stock had
    already gone up about 4-fold.

    --Aaron Lynch

    This was distributed via the memetics list associated with the
    Journal of Memetics - Evolutionary Models of Information Transmission
    For information about the journal and the list (e.g. unsubscribing)

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