The work of the Stock Exchange

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Monograph

Identifikator:: 1831284952

URN:: urn:nbn:de:zbw-retromon-225876

Document type:: Monograph

Author:: Meeker, James Edward http://d-nb.info/gnd/126597340

Title:: The work of the Stock Exchange

Edition:: Revised edition

Place of publication:: New York

Publisher:: The Ronald Press Company

Year of publication:: [1930]

Scope:: XVI, 720 Seiten; Illustrationen, Diagramme

Digitisation:: 2022

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter II. Organized security markets and their economic functions

Collection:: Economics Books

ORGANIZED SECURITY MARKETS 47 Moreover, the system is self-corrective, owing to the con- stant speculation in the stock market. \Whenever a price of a stock deviates temporarily from its intrinsic value, an oppor- tunity for a profit is at once afforded to thousands of keen and experienced speculators, who are not slow to seize it. If the price is below the value, they buy “for the rise”; while if the price is above the value, they sell “for the decline.” As a result of this speculative buying or selling, the inaccurate price is speedily driven back to conform with the inherent value of the security. Inaccurate judgment on the part of the speculator is quickly discouraged by the surest method that could possibly be devised—he loses money. Only in a highly organized market can short sales be readily and safely effected. In consequence, only in such a market do current prices have the full benefit of the free and unhampered interplay of speculative forces. It is, of course, true that prices established on a great stock exchange reflect collective human judgment, which like all human things may occasionally prove quite in error. It is also true that in markets into which the public freely comes, the collective psychology of the market sometimes may become subject to public excitement. The price movements of such markets up or down are likely to be accentuated by the exag- gerated hopes and fears of the inexperienced, just as the roll of a ship is increased by the movements of its loose ballast. Nevertheless, the collective judgment of the public as reflected in Stock Exchange prices is superior to its average judgment, since the stock market is affected by economic as well as merely psychological factors. The convincing reply to those who criti- cize the stock market as a very imperfect register of security values is, that if their own individual judgments are really so superior to those of the market, they have discovered for them- selves a royal road to fortune. Few such critics, however, ever seem to avail themselves of their unique gifts by a practical demonstration in the market. It is a mistake to associate manipulation with stock ex- changes. The more highly a market is organized. and the

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