Chapter 11 has a lot on bubbles and why they develop. Interestingly, Silver actually uses the whole “two ways to be wrong” thing directly, in order to point out that a trader who loses money in one way (selling only to have the market go up) is much more likely to be penalized than a trader who loses money with everyone else (buying only to have the market crash). This is why traders are so hesitant to acknowledge a bubble….they know that going against the crowd will get them far more penalized than making the same mistake as everyone else. Explains a lot, if you think about it.SignalNoiseCh11

Advertisements