I want to share with you this week a short but informative video that does a good job of explaining why financial markets do a pretty good job of getting the price reasonably right. The collective wisdom of the stock market is explained very well in the video through the use of jelly beans.
Of course, financial market prices gyrate all the time, but that is primarily the direct reflection of new information becoming available. What is quite different from a hundred years ago or even twenty-five is how quickly this new information is disseminated. It would be hard for someone to argue that financial markets are less efficient than they used to be. It also explains in practical terms, why financial markets are so hard to predict. Enjoy the video.
This 2-1/2 minute video explains how security prices are set—and change—based on the collective knowledge of buyers and sellers. Armed with this information, investors can be more confident about the power of the financial markets.
via The Power of Markets.