It is well known that the biggest influence on modern finance has come from the Chicago School’s efficient market hypothesis (EMH), MPT, capital asset pricing model and valuation of options. All these theories are ‘mathematically beautiful’ because what lies beneath them are neat assumptions: investors have access to the same information; they act in a rational manner and drive prices to an equilibrium between supply and demand. It is also well known now that these assumptions are balderdash. Investors suffer from biases. Charlie Munger, Warren Buffett’s partner, last listed 24 types of irrationality that all of us suffer from. It is these biases that drive prices and create volatility not rational people acting on self-interest driving prices to equilibrium. Investors hate losses more than they love their gains; this is why they hold on to poorly performing stocks. They go wild with exuberance in a bull market and are engulfed with pessimism in a bear market. 
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
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Articles outside the subscription period can be bought separately for a small price per article.
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