'The stock market just fell. Why?' 500 concise words without.....

[john kane]

I have just been given a list of essay titles. He asks us rather than doing the normal long essays, he wants 500 words with no formulae or theorems or diagrams or models, no direct quotes, no cutting and pasting of diagrams or tables or graphs. A bibliography will be required.

One of the options is 'The stock market just fell. Why?'

I have to reply asap as to my choice, my other option i am thinking of is 'Are there convincing economic arguments for honours degree classification?' (here in UK you get 1st, 2.1, 2.2, or 3rd, depending on if you mark is 70%+, 60-70%, 50-60%, sub 50%).

I think the latter is an easier essay, but maybe I would find the former more interesting. I guess I am just wondering whether you think it is easy to write 500 concise words on why stock market just fell? (note he has not said whether he is referring to this recent correction or in general why the fall, atm i assume this recent one given he says the word 'just'.

any thoughts useful, i will have to reply to his email in a few hours.

sorry if this is more 'dorm' forum, just you guys know a lot about whether this is easy to write given its only 500 words with lots of things you cant put.

i have done a lot of reading recently about this recent decrease in the market, just wondering on your thoughts as it whether i should pick it.

[Evan]

I don't really understand the second question, so I'd pick the first. That being said, I think doing a good job of the first is very hard.

[john kane]

yeah that is my worry, doing well on the 1st question will be very hard.

the second question is basically saying, is there a convincing argument why the UK system should not be like the US system.

in US i believe you have a GPA (?) so each person has an exact mark, be it 3.2, 3.6 etc.

in UK, if you got say 3.6 or higher, you would be given a 1st (first class degree). whether that be 3.6, 3.7, 3.8, employers would never know. if you got 3.0 to 3.5 then you would get a 2.1 ('second class degree') etc etc.

i think i will do the latter. it will just be easier to do i think. all i need is an okay mark this year, so better to go for safe option i think.

[maxtower]

It fell because prices were too high!

Seriously, how can you give a good answer here? Especially in 500 words...
Stocks fall when prices are too high compared to their underlying value. But it is impossible to say why on that day they fell by the amount that they did. If you could truthfully answer that question, it would seem you could predict these types of price movements and profit from them in the future. No one has really been able to do that though.

[PairTheBoard]

[ QUOTE ]
It fell because prices were too high!

Seriously, how can you give a good answer here? Especially in 500 words...
Stocks fall when prices are too high compared to their underlying value.

[/ QUOTE ]

I would say that it fell because people changed their minds. "Market Opinion" about what stocks were worth changed. The 500 point fall in price was preceded by a 500 point rise in price over the past few weeks. Was either of these moves due to a change in the underlying value of the stocks? I think the better answer is that the moves were due to a change in market opinion as to the value of the stocks.

I agree, if you could predict when people are going to change their minds you'd really have something.

PairTheBoard

[dazraf69]

I would add that human psychology dictates that what rises must fall. People IMO felt they were riding a short wave as long as possible and at the first sight of danger jumped ship!

So in other words an in-depth analysis in the human psychy in reference to winning/losing, risk/reward, and the idea of something being "too good to be true". Did that make sense?

[gull]

One could also argue more fundamentally than a change in valuations. New information led to that change.