Username:   Remember Me

Uber Articles {Über (ger) adj. above, beyond }

- Above and Beyond a Mere Article Directory


Psychological Factors That Might Have An Effect On The Stock Market

By Guest

When it comes to economics, stock markets are important because they are one of the best ways for companies to raise capital. The prices of shares and other assets is an important marker of the economic dynamics of the country, and can both influence and indicate social mood. If the stock market is on the rise, the economy is considered to be an up-and-coming economy.

For example, rising share prices may be associated with increased business investment, and they also affect the wealth of households. Stock markets also collect and deliver the shares and guarantee payment to the seller. This means nobody gets jipped when they are trading shares and investing.

The stock market is an interesting subject to study because in theory, the market should function normally. That is, the probabilities and risks involved in the stock market should be known and largely independent of the investment decisions of the different players. Yet from experience we have found that investors can temporarily move financial prices away from their long term price “trends.” Over-reactions can happen. Over the top optimism may drive prices unreasonably high or mass panic may drive prices unusually low.

Psychological factors have been known to influence the market strongly and have been studied and analyzed. For one, people have a tendency to see patterns that may not exist in reality. An example of this would be seeing a shape in a cloud or in an ink blot. This means that receiving a bunch of good news about a company may lead investors to overreact positively, which may drive the price of the stock up for no real reason. Another psychological phenomenon that could affect the stock market is group thinking. As social animals we are always looking over our shoulders to see what the other guy is doing, and often times basing our decision on what he does for no explicable reason.

The stock market may be so fickle because securities and stocks can be increased or decreased down by any amount of fast market changing happenings. Emotions have a tendency to drive prices down and up, people are simply not rational creatures, and reasons for buying and selling are honestly obscure at best a lot of the times. Irrational investment decisions incorrectly price securities, which causes inefficiencies in the market, which are, in turn, huge opportunities to make, or lose, money.

Mallory Megan works for Rapid Recovery Solution and writes articles about medical collection agencies.

Article kindly provided by

Topics: Stocks Mutual Funds | No Comments »

Tags: , , , , , , , , , , ,

Article Citation
MLA Style Citation:
Guest, Guest "Psychological Factors That Might Have An Effect On The Stock Market." Psychological Factors That Might Have An Effect On The Stock Market. 1 Jul. 2010. 19 Aug 2014 <>.

APA Style Citation:
Guest, G (2010, July 1). Psychological Factors That Might Have An Effect On The Stock Market. Retrieved August 19, 2014, from

Chicago Style Citation:
Guest, Guest "Psychological Factors That Might Have An Effect On The Stock Market"

Reprint Rights

Creative Commons License
This article is subject to a revocable license under a Creative Commons Attribution-No Derivative Works 3.0 Unported License, which means you may freely reprint it, in its entirety, provided you include the author's resource box along with LIVE VISIBLE links (without "nofollow" tags). We may revoke the license at any time with or without cause. You must also include the credit to

Comments are closed.

Uber Articles and its partner sites cannot be held responsible for either the content nor the originality of any articles. If you believe the article has been stolen from you without your permission, please contact us and we will remove it immediately. If you have a problem with the accuracy or otherwise of the content of an article, please contact the author, not us! Also, please remember that any opinions and ideas presented in any of the articles are those of the author and cannot be taken to represent the opinions of Uber Articles. All articles are provided for informational purposes only. None of them should be relied upon for medical, psychological, financial, legal, or other professional advice. If you need professional advice, see a professional. We cannot be held responsible for any use or misuse you make of the articles, nor can we be held responsible for any claims for earnings, cures, or other results that the article might make.
  • RSS Feed

    RSS for Stocks Mutual Funds