Analysis of advantages and disadvantages of six stock market theories

Why do stock prices fluctuate? It has always been a mystery to investors, and so far there is no theory that can reasonably explain this problem. At present, there are various theories to study the causes of stock price fluctuation. Xiaobian has sorted out the advantages and disadvantages of stock market theory here for your reference. I hope everyone will gain something in the reading process!

value theory, confidence theory, inverse theory, stochastic theory and Adam theory. Each of the above theories has its rationality, but it also has its fatal weakness.

value theory:?

according to the value theory, the essential value of a stock lies in dividends, and the stock price fluctuates according to the relationship between supply and demand around the essential value of the stock (including investors' expectation of the future value of the stock).

The advantages of the value theory are as follows:

1. By comparing the return rate of listed companies with the bank interest rate, the investment value zone and investment risk zone of stocks can be clearly defined. It can prevent investors from blindly chasing up and down.

2. Easy to operate, that is, buy in the value area and sell in the risk area.

Disadvantages of the value theory:

1. The value theory cannot explain many abnormal phenomena in the market, that is, the stock prices in the stock market are not ranked by the performance of listed companies.

2. The stock selection method is single, which ignores the market hotspots and can't keep pace with the market. It is easy to lock funds in unpopular stocks.

3. The income of listed companies can only be referenced by historical income, and it is difficult to accurately grasp the future income of listed companies. In different periods of the stock market, people have different values. In this sense, it is impossible for the value theory to accurately predict the future trend of stock prices.

confidence theory:

according to the confidence theory, the factors contributing to the stock price change are the market's confidence in the future stock price, the company's profit and the stock investment ratio. If you have strong confidence, you will buy more and sell less, and the stock price will naturally rise. If confidence is weak, sell more and buy less, and the stock price will naturally fall.

The advantages of the confidence theory are:

The confidence theory makes up for the shortcomings of the traditional theory, provides a reasonable explanation for the abnormal phenomenon of the stock market, avoids the mechanical single stock selection method, and expands the investment field.

Disadvantages of confidence theory:

1. Confidence theory pays too much attention to investors' confidence, ignoring the trend of economic development and the nature of listed companies, and ignoring market risks.

2. It is difficult to measure and grasp the high and low level of investors' confidence.

3. It can't explain the phenomenon that often occurs in the stock market. When most people watch for a long time, the stock price may peak, while when most people are bearish, the stock price may bottom out. In this sense, it is impossible for confidence theory to accurately predict the future of the stock market.

contrary theory:

contrary theory holds that when most people look good, the bull market may bottom out. When most people are bearish, the bear market may bottom out. As long as you are contrary to the opinions of the masses, there will always be opportunities to get rich.

On the surface, the contrary theory is opposite to the confidence theory. In fact, they are essentially different. The opposite theory is a theory to judge the bull-bear transition in the stock market, while the confidence theory is a theory to judge the continuation of the market.

The theoretical basis of the opposite theory is that the stock market is driven by funds. When most people are bullish, there will be no follow-up funds to promote this market. When most people are bearish (holding money), the stock market gathers enough energy to do more.

Advantages of the opposite theory:

The opposite theory can make investors calmly treat the extreme market and avoid blindly chasing up and down.

Disadvantages of the contrary theory:

1. The market sentiment can't be judged, and the trading volume of the big bull market can be continuously enlarged, sometimes attracting a large number of new investors to enter the market. Therefore, it is easy to leave the market prematurely when using the opposite theory in case of super big market, and lose the final profiteering. In a bear market, the volume of transactions is often shrinking, and it is difficult to grasp the real turning point. In other words, the opposite theory cannot explain the phenomenon that the strong are always strong and the weak are always weak. Therefore, the opposite theory can not accurately predict the stock market.

random walk theory: random walk theory denies the above theories, and thinks that the fluctuation of stock price is random and there is no trace to be found.

random walk theory holds that buyers and sellers are equally smart, everyone knows how to analyze, and the information used in the analysis is open. When both buyers and sellers think the price is fair, the transaction will be completed. Therefore, the price of the stock in the market has already reflected its basic value, which is a reasonable price at this stage. This price will not change much in the short term. Only when new information flows into the stock market will market participants re-evaluate the value of the stock and make a decision to buy and sell, resulting in new changes in the stock price. And all kinds of new information are untraceable and suddenly flow into the stock market, and no one can predict it beforehand. And the quality of information is determined by the market (main force), not by the nature of information. Moreover, it is difficult to judge how much influence information has on the stock market. Therefore, any forecasting method of stock price is untenable.

The greatest advantage of random walk theory is that it can reasonably explain all phenomena in the stock market, and this is the greatest weakness of this theory. Because it makes investors completely agnostic.

Adam's theory:

Adam's theory also admits that the stock market is unpredictable, and thinks that no analytical tool can predict the stock market absolutely and accurately. If the stock market can be predicted, you can make a fortune by RSI, MOM and other indicators. The essence of Adam's theory is to guide people to abandon all subjective analytical tools, enter the speculative market in an absolutely ignorant state, observe the trend and follow the trend. Only by following the trend can we reduce the risk to the lowest limit and make money in the stock market. This theory emphasizes that "making money is the most important thing".

Advantages of Adam's theory:

1. It's easy to keep pace with the market and make profits in a short time.

2. The weekly capital rate is high, which is convenient for bull market operation.

3. Do not participate in the operation in the bear market with downward trend.

Disadvantages of Adam's theory:

1. The theory itself is self-contradictory. On the one hand, it emphasizes unfathomable potential, on the other hand, it emphasizes following the trend. In fact, Adam's theory recognizes the existence of trends.

2. The stock price fluctuates very frequently, and the trend is different, so it is difficult to grasp the "potential". This theory is not suitable for the operation of a bear market and a balanced market.

the above theories deny the measurability of the stock market to varying degrees, but there is a similarity, that is, the stock price fluctuates according to the relationship between supply and demand. It's just that the factors affecting the relationship between supply and demand are different. This undoubtedly gives us a kind of enlightenment, that is, we should make a careful analysis and research on the stock market according to the two characteristics of stock supply and demand and unpredictable stock market.

Plasticity theory:

Plasticity theory holds that the fluctuation of stock price depends on the willingness of the main institutions to go long and short, because only the main institutions can drive and hit the market sentiment. The willingness of the main institutions to do long and short should consider the factors of the market on the one hand, and the plasticity of the target stock on the other hand, because the plasticity of the stock directly affects the difficulty of the main force to manipulate the stock. The so-called plasticity means that the stock has the conditions for the main force to manipulate at will, which include unfavorable factors and favorable factors. In this way, the main force can shape and change the image of the stock at will according to the needs of its different operating periods, so as to achieve its purpose of inducing retail investors.

the main force must meet three conditions. In the bottom financing stage, retail investors need to throw out the cheap code in their hands; In the pull-up stage, it is necessary to constantly replace retail investors and raise the cost of retail investors. In the shipping stage, retail investors are required to dare to undertake high-level chips. Therefore, the main force to successfully operate a stock must induce the retail investors. This is doomed that the stock must have strong plasticity.

The advantages of the plastic value theory are as follows:

1. It can reasonably explain all phenomena that cannot be explained by the above theories.

second, investors can flexibly use the above theoretical advantages.

Third, it provides investors with a new idea of stock selection.

The disadvantage of plasticity theory is that

it is difficult to grasp the plasticity of stocks, which requires investors to have certain investment experience and analytical ability. Only in this way can we accurately grasp the functions and significance of various themes

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