Previously published as a subscriber-only article on 16 Nov 2015
They call it ‘behavioral finance’. It’s the study and application of how psychology affects decision-making in financial markets. This field is widely studied now in both academia and the business world alike, with many works such as this
, and is a primary reason (the other being greed) the application of algorithms in computerized trading (news dissemination, etc.) has taken over the trade on modern day stock exchanges. It’s estimated that machines now perform more than 80% of all trading on major stock exchanges around the world, and it’s the algorithms that tell them what to do. So, the question then becomes, what are they being told to do?