Prompted Post #7 Contemplating Controversy

One of the article I found online, which talks about 7 controversial issues about investing. Financial analysts mostly work on investing, so that the issues about investing matter to analysts. 

Controversy

• Efficient Market Hypothesis
• Fifty Percent Principle
• Greater Fool Theory
• Odd Lot Theory
• Prospect Theory (Loss--Aversion Theory)
• Rational Expectations Theory
• Short Interest Theory
• The Bottom Line

Rational Expectation Theory

"The theory states that the players in an economy will act in a way that conforms to what can logically be expected in the future. That is, a person will invest, spend, etc. according to what he or she rationally believes will happen in the future (7 Controversial Investing Theories)." Some economists think the theory is important, but some of them think develops economy can not rely on this theory. The problem with this theory is "it can be changed to explain everything, but it tells us nothing ( 7 Controversial Investing Theories)." Investors or economists like seeing actual numbers or using models to analyze problems with current economy. This theory sometimes is not reliable. "Moreover, it allows us to predict (correctly or not) human behavior without stirring out of our armchairs to observe what such behavior is like (Rational Decision Making in Business)." The theory does help economists predict households' behaviors, but it can not actually tell economists actual thing that would help economists make adjustment.

Rational Expectations Theory in Life

Works Citation

• Andrew, Beattie. "7 Controversial Investing Theories." INVESTOPEDIA. N.p., n.d. Web. 20 Mar. 2016. <http://www.investopedia.com/articles/financial-theory/controversial-financial-theories.asp>.
• Herbert A, Simon. Rational Decision Making in Business Organizations. N.p.: American Economic Association, 1979. JSTOR. American Economic Association, Sept. 1979. Web. 20 Mar. 2016. <http://www.jstor.org/stable/1808698>.