RE:How Low
The Pendulum Theory Grew Out Of Sir Isaac Newton’s 17th-Century Studies Of Gravity And Physics, Particularly His Second Law Of Motion. Yet The Theory Turns Up In All Sort Of Discussions. This Includes Investors’ Efforts To Understand The Stock Market.
You could sum up the investment version of the pendulum theory like this: stock prices alternate between periods of overvaluation and undervaluation; the degree and duration of each period of overvaluation is related to the degree and duration of the subsequent period of undervaluation, and vice versa.
In other words, pendulum theory says that when stocks head downward after a period of overvaluation, they won’t stop at fair value. Instead, they’ll keep dropping until they hit lows that are in some sense as out of whack as previous highs, or close to it.
The Pendulum Theory Grew Out Of Sir Isaac Newton’s 17th-Century Studies Of Gravity And Physics, Particularly His Second Law Of Motion. Yet The Theory Turns Up In All Sort Of Discussions. This Includes Investors’ Efforts To Understand The Stock Market.
You could sum up the investment version of the pendulum theory like this: stock prices alternate between periods of overvaluation and undervaluation; the degree and duration of each period of overvaluation is related to the degree and duration of the subsequent period of undervaluation, and vice versa.
In other words, pendulum theory says that when stocks head downward after a period of overvaluation, they won’t stop at fair value. Instead, they’ll keep dropping until they hit lows that are in some sense as out of whack as previous highs, or close to it.