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mobile comments on The Affect Heuristic - Less Wrong

37 Post author: Eliezer_Yudkowsky 27 November 2007 07:58AM

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Comment author: mobile 27 November 2007 05:58:06PM 1 point [-]

In fairness to analysts, if you are judging stocks that nobody is familiar with, or even worse, that nobody except for people who are complete morons are familiar with, then the risk-return relationship will break down. In general, judging whether an investment is fairly priced depends on your confidence in the judgement of the informed traders (which may include you, if the investment is familiar). The ordinary economic theory you cite does not apply when the market may become inefficient.