The Psychology of Speculation. English-only reading by default; switch among English, Chinese, and Spanish, or compare languages side by side.
This chapter examines SPECULATORS ARE SLAVES OF SENTIMENT, using the author’s early-twentieth-century investment framework to explain how investors were expected to judge security quality, income, risk, and market conditions. It opens from the chapter’s own discussion: When the whole country becomes pervaded with an epidemic of bullishness the action of speculators is always directed by sentiment rather than judgment; and a market that is swept along by excited emotions is always dangerous,—dangerous to go short of and dangerous to be long of. Hysterical “bulls” care nothing whatever about the earnings or dividend returns on a stock; the only note to which they attune their actions
Readers studying financial history, investment education, and the chapter’s specific subject—epidemic of bullishness, sentiment, stampede—will get the most from this section. It is not suitable as a modern trading or investment checklist.
Read this chapter as historical investment education. The market rules, disclosure practices, securities, commissions, interest-rate conditions, and investor protections around epidemic of bullishness, sentiment, stampede may differ sharply from modern markets.