Socionomic Perspective

[donaldprice]

I thought I would post an interesting article by Robert R. Prechter who help write the famous must read book of "elliott wave principle: key to market behaviour" of which took technical analysis by storm". The article in summary explains the concept of socionomics and the huge influence of human psychology plays a heavy role in financial markets, regardless of rational or irrational behaviour. It also defines supply and demand of any chosen market to be driven more by human behaviour than of supply and demand in itself, of which if anybody has studied economics may find a hard time agreeing with this theory but it is just outlines the differences between economics and finance, example as the price of a stock rises so does demand, where as normally in basic economic theory if prices rise, volume of purchase should decrease. Also anybody a fan of George Soros work on  reflexivity will find similar findings. Just be warned that this article takes a while to read, therefore probably something to read in your spare time.

http://poseidon01.ssrn.com/delivery.php?ID=480102116097122109120094078101101030127059060050007025029030115007114000025066002011033056120123040008022110115114094000082106057004042083061118070111065010071004107030077052009077103124082127011067030002083069025120118094003071126019096118103005126013&EXT=pdf

And if you are interested in heard behaviour here is another article, as I say, reading for when you can find some time. lol.

http://www.homepages.ucl.ac.uk/~uctpagu/Field_Experiment.pdf