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#111
10-31-2007, 05:04 PM
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Re: How is the stock market NOT zero-sum?
Surely every time someone makes some kind of trade they are making a judgement as to the value of a stock. If they are buying and the stocks's underlying value is less than the price then they lose and the seller gains and vice-versa.
I think it's hard to define buy-and-hold investing as a game when people are just buying a stock and then receiving a stock's risk-adjusted return in the long run, there are no decisions being made except when trades are made. If someone buys a stock and gets better than the true risk-adjusted return then they got lucky, they didn't win. |
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#112
10-31-2007, 05:37 PM
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Re: How is the stock market NOT zero-sum?
[ QUOTE ]
Surely every time someone makes some kind of trade they are making a judgement as to the value of a stock. If they are buying and the stocks's underlying value is less than the price then they lose and the seller gains and vice-versa. I think it's hard to define buy-and-hold investing as a game when people are just buying a stock and then receiving a stock's risk-adjusted return in the long run, there are no decisions being made except when trades are made. If someone buys a stock and gets better than the true risk-adjusted return then they got lucky, they didn't win. [/ QUOTE ] And how do you measure the risk adjusted return for an individual stock out of curiosity? |
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#113
10-31-2007, 07:07 PM
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Re: How is the stock market NOT zero-sum?
[ QUOTE ]
[ QUOTE ] Surely every time someone makes some kind of trade they are making a judgement as to the value of a stock. If they are buying and the stocks's underlying value is less than the price then they lose and the seller gains and vice-versa. I think it's hard to define buy-and-hold investing as a game when people are just buying a stock and then receiving a stock's risk-adjusted return in the long run, there are no decisions being made except when trades are made. If someone buys a stock and gets better than the true risk-adjusted return then they got lucky, they didn't win. [/ QUOTE ] And how do you measure the risk adjusted return for an individual stock out of curiosity? [/ QUOTE ] yeah I can see how that can bring non-zerosumness into it since different people's risk tolerance are different etc. I guess that the problem with considering just the respective underlying values of things being traded is that there is no surefire way of realising the value of a security immediately after acquiring it unless the market corrects itself quickly. |
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#115
10-31-2007, 10:35 PM
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Re: How is the stock market NOT zero-sum?
[ QUOTE ]
Its the same way as when your neighbor sells his house for $100,000 more than the last sale and everyone on the street feels they are $100,000 richer. They can even borrow that money out and spend it based on that one sale. Something from nothing. Everyone feels they have gained and no one has lost. [/ QUOTE ] What about the people who buy the houses for $100,000 more? All these examples fail to recognize all the players in the game. |
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#116
11-01-2007, 04:38 AM
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Re: How is the stock market NOT zero-sum?
[ QUOTE ]
[ QUOTE ] Its the same way as when your neighbor sells his house for $100,000 more than the last sale and everyone on the street feels they are $100,000 richer. They can even borrow that money out and spend it based on that one sale. Something from nothing. Everyone feels they have gained and no one has lost. [/ QUOTE ] What about the people who buy the houses for $100,000 more? All these examples fail to recognize all the players in the game. [/ QUOTE ] We have a street of 10 people who bought in a new development for $600,000. 6 months later one person sells for $700,000. He made $100,000 and 9 other people feel they are $100,000 richer. Who lost? |
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#117
11-01-2007, 04:48 AM
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Re: How is the stock market NOT zero-sum?
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The IPO theory saying why stocks aren't zero sum is a really, really, weak argument. [/ QUOTE ] Really? In August 2004 Google sold 19.6 million shares to the public at $85. Today those shares are priced at $707, that is a $12 billion aggregate profit from those shares. Since you think IPO's are zero sum who lost $12 billion? |
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#118
11-01-2007, 08:11 AM
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Re: How is the stock market NOT zero-sum?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] Its the same way as when your neighbor sells his house for $100,000 more than the last sale and everyone on the street feels they are $100,000 richer. They can even borrow that money out and spend it based on that one sale. Something from nothing. Everyone feels they have gained and no one has lost. [/ QUOTE ] What about the people who buy the houses for $100,000 more? All these examples fail to recognize all the players in the game. [/ QUOTE ] We have a street of 10 people who bought in a new development for $600,000. 6 months later one person sells for $700,000. He made $100,000 and 9 other people feel they are $100,000 richer. Who lost? [/ QUOTE ]If the wealth the other 9 people "feel" they have is real, then it must be convertible into cash. In order to convert it into cash, you need to bring in an outside player. This outside player will end up spending $100,000 more since the houses are more expensive. |
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#120
11-01-2007, 11:38 AM
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Re: How is the stock market NOT zero-sum?
[ QUOTE ]
[ QUOTE ] The IPO theory saying why stocks aren't zero sum is a really, really, weak argument. [/ QUOTE ] Huh??? [/ QUOTE ] Just what I thought too Adios. I have avoided this pissing match so far but anyone who thinks the stock market is a zero sum game is either using some definition they created from thin air or are ignoring specific pertinent paramaters which amounts to the same thing IMHO Jimbo |
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