Dear Fellow-Investor.
Why do totally overvalued and overrated stocks go up and up while cheap high quality stocks often come to a standstill?
At the stock markets, more often than not, the brain is being switched off and the rational thinking stops which is risky and can cost a lot of money!
Its the same over and over again. If a stock makes a lot of profit investors tend to fall hopelesly in love with a security. But when it drops, many of us just look at the bad news and just tend to see dark clouds in the sky and act accordingly by selling instead of scrutinizing the fundamental data and the perspective of such corporation.
They are being led by emotions i.e. psychology. Where proper action is required, hunches and gut feelings take over instead of switching the brain back on!
Science and research has scrutinized what is called Behavioral Finance to find answers to why and how investors come to such irrational behaviour. They try to find out what makes investors tick and why a lot of them throw their money at high risk securities like OTC (over the counter) stocks.
Rational thinking was also highly neglected during the late 90s and...
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