Zero intelligence. A new model suggests that decisions of stock market traders have little effect on the market. Credit: Henny?Ray?Abrams/Reuters
The intelligence of stock traders may have no effect on the market The stock market works like a frenetic, two-way auction, with buyers and sellers simultaneously placing bids. Modern economists imagine that stock market traders are intelligent and make their bids based on what they think a stock is worth. The volatility of the market--how big the jumps in price get--should be based on the amount of information the traders hear, goes the reasoning. More information means a jumpier market, as intelligent traders analyze the news and shift their bids around to get the best deal.
Source: Getting Rich--a No Brainer? [ http://sciencenow.sciencemag.org/cgi/content/full/2005/201/4?etoc ], Kim Krieger, Science Now, 05/02/01