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From 1982 1999 volume rose from 42 to 78 of all

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Unformatted text preview: vant (money illusion). 11) Volume of trade has increased because of online trading, day trading, etc. From 1982-1999 volume rose from 42% to 78% of all shares trading per year on the NYSE and from 88% in 1990 to 221% in 1999 on the NASDAQ. Given that stocks should be long term investments, this implies that everyone now is a day trader! 12) Gambling in the US increased dramatically over this interval of time and became more legitimate with increased use of State lotteries. AEM 414 AEM Professor Schulze Lecture 10 Conclusion These precipitating factors created a psychologically devastating environment that both encouraged and allowed anomalous behavior to flourish in the stock market to a degree never experienced before – the degree perfect storm. AEM 414 AEM Professor Schulze Lecture 10 Causal Factors Schiller places great confidence in confidence as a Schiller confidence measure that contributes to an amplification measure amplification process. First, Schiller argues that stock market bubbles are a kind of Ponzi Scheme or process perpetrated on kind Scheme witless investors. The key element in a Ponzi Scheme is that you must The Scheme have a believable story that convinces people to participate because they will absolutely make money for sure by participating. Professor Schulze AEM 414 AEM Lecture 10 Causal Factors (cont.) Shiller describes one version of the story as follows: In his Shiller describes 1999 book, DOW 40,000, David Elias quotes one person’s argument in favor of investing as follows: “An example of argument what can happen when an individual waits for the Dow to indicate a perfect time is the saga of Joe, a friend of mine. Joe started calling me in 1982 waiting for the perfect time to get into [stocks]. Over the years he continued to seek….his perfect moment. Today at 62 Joe still has...
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