On Jan 19, 2007, at 3:05 PM, Wojtek Sokolowski wrote:
> Doug:
>
>
> What do you think drives anticipations of the future, if not the
> recent past? There's nothing to make people think the price of an
> asset at time t+1 will be greater than the price at time t than the
> fact that the price at time t is greater than that at t-1, and
> t-1>t-2, etc.
>
>
> [WS:] Not necessarily. Think, for example, of a piece of "railroad
> property" i.e. land bought in anticipation of railroad being built
> next to
> it (which happened a lot in this country's past.)
This is inside information. While there's a nontrivial amount of that around, it's not what drives the broad financial markets from day to day.
> I would like to add that I am not trying to defend NCE, but rather
> think of
> an argument that would save the NCE's core assumption - the price-
> demand
> relationship - against empirical evidence.
Of course, orthodox finance theory assumes no inside information.
Obviously the price/demand relationship isn't all wrong, but it does have some problems.
Doug