Geoffrey W. Sutton PhD, Psychology and Culture

The greed that leads to market tops and crashes can account for the arguably more painful aftershocks too. And there's more psychology at work. MASSIVE LOSSES In 2007 the DJIA topped on 29 Sept at 14, 164.53. Then plunged 777.68 on 9 October. But the bottom did not hit until 6 March 2009 at 6,443.27 - more than a 54% loss! The US markets famously crashed 18 October 1929 (almost 90%) BUT the market did not hit bottom until 8 July 1932. The "bargain scoop-up rally" did not last. Some may recall 19 October, 1987, the market crashed again losing 23% in one day (DJIA). A PSYCHOLOGICAL PERSPECTIVE Markets are not things. Investments may be analyzed, but markets are about human behavior--people trying to be smart when buying and selling. Some try to get ahead of the herd. Some get greedy when markets fall and try to jump on a bargain only to find out it's cheap for a reason-- no one wants what they bought. Stocks,...