Kirk vs. Spock

[master_q 0]

Kirk vs. Spock

Investing in the Stock Market

 

I do follow the Stock Market

Here is an interesting article I found from TrekToday (it provided a link). . .

 

 

How Capt. Kirk would out-invest Mr. Spock

Passionate investors win endorsement of scholars at Fed

By TOM WALKER

 

As an investor, are you Mr. Spock, a rational, unemotional decision-maker who weighs all the options, or Captain Kirk, who is likely to respond with his feelings in making a decision?

 

At first glance, Mr. Spock would seem to have the advantage and make the best judgments about which stocks to buy.

 

Not necessarily, say a trio of visiting scholars at the Federal Reserve Bank of Atlanta. Captain Kirk is more likely to do the right thing, they argue in a research report -- just as he did on the bridge of the Enterprise on TV's long-running "Star Trek" series.

 

"Though Spock fully analyzes each situation, he gets too caught up in the details," say the economists. "Emotion allows Kirk to focus and enhances his ability to make critical decisions."

 

File photo

 

The report concludes that Captain Kirk from "Star Trek" (William Shatner, right) would fare better in market than the ever-logical Mr. Spock (Leonard Nimoy).

 

 

Thus, another voice is added to the growing debate about investor psychology.

 

As a practical matter, the debate has a lot to say about whether we can expect the market to resume a solid, lengthy upturn, or continue in a prolonged period of subpar growth and investment returns.

 

The Atlanta Fed's foray into the discussion was written by Lucy F. Ackert, a professor at the Michael J. Coles College of Business at Kennesaw State University; Bryan K. Church, a professor at the DuPree College of Management at Georgia Tech; and Richard Deaves, a professor at the Michael C. DeGroote School of Business at McMaster University in Hamilton, Ontario.

 

The issue is whether investors behave rationally or irrationally in buying and selling stocks and other securities.

 

The prevailing theory on Wall Street, represented by Mr. Spock, is the efficient market hypothesis, or EMH. It says that investors are rational agents who act in their own self-interest and that markets are efficient -- meaning that relevant new information is immediately reflected in stock prices.

 

The import of the EMH for investors is that nobody has an advantage -- legally -- over anyone else in the stock market, and therefore nobody can "beat the market" in the long run.

 

If that's true, the prudent strategy would be to buy an index fund -- a mutual fund that invests in all the stocks of an index such as the Standard & Poor's 500. You can't beat the market that way, but you can't underperform it either.

 

On the other side of this debate is the so-called science of behavioral investing, which Yale professor Robert Shiller made famous three years ago in a book, "Irrational Exuberance."

 

That's the memorable phrase Federal Reserve Chairman Alan Greenspan uttered in a December 1996 speech when the stock market was beginning to rise rapidly -- too rapidly, he suggested, and for the wrong reasons. Was emotion ruling reason?

 

Shiller is said to be the economist who gave Greenspan the idea for that phrase, based on the idea that investing can be irrational, fueled by emotion and momentum rather than sober research into corporate fundamentals.

 

Shiller declared that the emotional state of investors was "no doubt one of the most important factors causing the bull market" that peaked in early 2000 and then collapsed.

 

University of Chicago professor Richard Thaler, another founder of behavioral economics, was even more blunt: "In a rational world, [the bubble in technology stocks] would never have happened."

 

New bubble fears

 

The controversy represented by the "Star Trek" characters has gotten increasing attention since the stock market collapsed in 2000.

 

Some Wall Street analysts believe they see fresh signs of a return of 1990s-style excessive exuberance in the stock market's current rally. Even after the recent plateauing of stock prices, the S&P 500 is up by 22.4 percent since the March 11 low.

 

Critics of the EMH argue that some investors trade less on information than on "noise," or stock activity caused by computerized program trading and other phenomena that do not reflect general sentiment. Noise traders may think they are trading on information when they aren't.

 

The Atlanta Fed scholars enter the debate with a basic observation: In essence, there's no such thing as pure reason devoid of emotion. And in those instances where it seems to exist -- as in people with brain injuries -- the absence of emotional response is an impediment to rational action.

 

Far from interfering with sound decision-making, they say, "emotion actually enhances an individual's ability to make rational choices."

 

"Perceptions encompass emotional aspects, which subsequently guide judgment and decision-making. Furthermore, theorists recognize that emotion and cognition are interdependent, rather than competing, influences," their report concluded.

 

Behavioral analysts look at actions such as investors who tend to hold on to losing stocks and sell their winners, just the opposite of professional investors.

 

These researchers have found that an investor's willingness to take a risk is guided more by fear of loss, and the accompanying pain, than the lure of gain, with its feeling of pleasure.

 

Willing participants

 

As for irrational exuberance, research firms such as Yankelovich Partners in Atlanta have found that some of the investing in the 1990s was motivated by a feeling of superiority on the part of the investor.

 

"There was a sensibility tied to people's exaggerated sense of control and empowerment that contributed to the willingness to participate in the market," said Yankelovich President J. Walker Smith.

 

Is the prevailing wind of stock market analysis about to shift toward the behaviorists?

 

Probably not, the Atlanta Fed scholars concluded. The efficient market hypothesis paradigm, or overview, appears secure for the time being because it continues to work as a tool for analysis.

 

"Though recent models explain certain aspects of financial decision-making that appear to be inconsistent with the efficient market hypothesis, financial economists are without a superior paradigm," the scholars said.

 

But that's not the end of it.

 

"While some argue that in certain situations, emotion may 'get in the way' and lead to suboptimal decision-making," they assert, "we believe that emotion is an important aspect of the human condition that can actually enhance decision-making."

 

Put another way, a stock market without emotion would be like "Casablanca" without "As Time Goes By."

 

What do you think about this?

How would other characters fair up to each other?

 

 

Master Q

StarTrek_Master_Q@yahoo.com

Edited August 3, 2003 by master_q

[EmilSoong 0]

Actually, I believe that Spock would be better on the market than Kirk. After all, Spocks a much better person. Just my opinion, though.

[Admiral Kirk 1]

I think Kirk would be better. Kirk has a tendency to think out side of the box. He's also a risk taker with good instincts. Spock would be okay though in a methodical way.

[Mr.Picard 12]

Spock would make his decisions based on logical facts, but the Stock Market is not always logical.

 

So I think Kirk would earn a lot of money

 

 

 

Mrs. Captain Picard

[master_q 0]

Spock would make his decisions based on logical facts, but the Stock Market is not always logical.

 

So I think Kirk would earn a lot of money :blink:

 

 

 

Mrs. Captain Picard

Exactly

 

That’s why he would do better in the market. Someone who invests and does understand a bit of how the market works knows that it does not follow logic ...

 

 

Master Q

StarTrek_Master_Q@yahoo.com

[Data 0]

:blink: Actually, I believe that Spock would be better on the market than Kirk. After all, Spocks a much better person. Just my opinion, though.

Actually, a person who is able to make decisions with an air of strategy would do well in the stock market. Also a person who also is great with statistics would do well. I think they both would do well.

 

Kirk because he is great with strategy and Spock because he is great with statistics.

[EmilSoong 0]

Kirk cannot be the better of the two since Spock is what makes Kirk capable of logical thought.

[emojams 0]

spock most definately ,kirk thinks with his other "head".

[roguedawg 0]

Essentially playing the stock market is a big gamble and logic just doesn't get the job done.Sometimes you just have to go with your gut no matter what the facts and figures tell you.Spock,though capable of doing this,wouldn't because like most Vulcans(though to a much lesser degree) he is an elitest,a polite bigot(c'mon,you know Vulcans think they're superior to everyone!),and would never indulge his humanity to that degree.Or,maybe I'm wrong. :blink:

[master_q 0]

The argument is not who is the most logical because a more logical person would take less risk and would base choices on stats and look too much into them, but you can’t do that when you play in the stock market. You just can’t. People that do this usually drop out because they can’t handle it or they don’t make much profit.

 

I invest in the market and for me to make money I have to take some risk (but of course I have to do that in moderation). The market runs somewhat chaotically because the stats don’t correlate with the stocks. The state of investors moves those stocks. That’s the point and dismisses what some of you are saying. I would bet that the ones that are saying “Spock” don’t invest and so don’t really know how the markets work.

 

The Stock Market runs on passion, emotion, not logic.

When people feel good the market goes up. (Well almost)

 

Shiller declared that the emotional state of investors was "no doubt one of the most important factors causing the bull market" that peaked in early 2000 and then collapsed.

 

Like I stated I’m an investor and when I make a choice on holding, selling, or buying I don’t just look at the stats I have to look at the state of investors.

 

I’m not going to talk about the dot com bubble and what I think of that (because it would get me too off topic), but the reason that market created this bubble is not because of logic (and in fact if logic was there then a bubble would have never been created!). The whole dilemma of 2000 proves the market runs on the state of investors and NOT logic.

 

Watch the markets, really.

I can re-count tons and tons of times that the stats showed a more negative sign but the stock still went up! The “emotional state of investors” was the reason. Kirk could perceive the markets and act in the “state” of investment better then someone like Spock because he would find it “illogical.”

 

 

Let me give an example:

 

How do you think Spock would play in poker?

 

If you say that Spock would do better in the market, then it is like saying that Spock would play better in poker versus Kirk

 

Spock by his very nature would not play the game good. He would probably play worse then Data does. If you remember the first time Data played he could not reason why someone would “bluff.” I probably don’t have to go on because everyone probably is following were I’m leading to.

 

 

Just a few days ago the US economy is showing signs of recovery. However, even with that news the markets that day still went down because of the state of investors. (Investors did feel that it was good news, but kept looking at the underlining problems - - - in a nut shell they had a negative “state”) ....

 

 

Master Q

StarTrek_Master_Q@yahoo.com

[Captain Bolivar 0]

Remember Spock is half human. He can understand or at least predict the emotions of humans and thus he would understand the role that human emotions are playing in the stock market. You combine that with his logical super powers and boom, Spock would be a market tycoon.

[JTKirk1 0]

I think that Kirk would do better than Spock. He's more of a risk taker than Sopck is he'd go for some of the not so safe stocks and then watch them grow. As Spock would go for the logical stocks and watch them plumit. But that's my opinion about it.

[master_q 0]

{Well I don’t dismiss the fact that Spock is half human. When you observe his actions or should I say reactions to human emotions many times he has been puzzled and this has been apparent (I think) in episodes and movies}

 

 

Master Q

StarTrek_Master_Q@yahoo.com

[WildStar 0]

:lol: Actually, I believe that Spock would be better on the market than Kirk, because Valcons are thinkers