Behavior Quote by Charlie Munger
“The possibility that stock value in aggregate can become irrationally high is contrary to the hard-form "efficient market" theory that many of you once learned as gospel from your mistaken professors of yore. Your mistaken professors were too much influenced by "rational man" models of human behavior from economics and too little by "foolish man" models from psychology and real-world experience.”
About This Quote
Source Speech: USC Business School, 2014
He critiques efficient market theory, noting irrationality and psychological factors ignored by economists.
In simple terms: Markets are often irrational, contrary to theory.
Key Takeaway
Consider human psychology in markets.
Themes
economics
behavioral finance
irrationality
Mood
analytical
critical
Type
lecture
financial
When to use this quote
- investment strategy
- risk assessment
- financial education
Key Concepts
psychology
market theory
Questions to Reflect On
- How to blend rational and irrational models?
- What evidence supports each view?
A Different Perspective
Overemphasis on irrationality may ignore rational trends.
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