I see news articles about stock prices going up or down due to investor confidence or trust. How can group-think affect a stock price that rapidly is the value of the company is largely unchanged?
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Say a report comes out that a company is changing CEOs, and the new guy doesn’t have a great record. Generally accepted knowledge amongst professional investors means this could cause the company to lose money, and the stock to go down. So a bunch of people who learned their “fundamentals of business” the same way and think the same thing start selling off this company. Investors who don’t know about the CEO thing see a bunch of high-level financial types selling the stock, and think “well they must know something” and start selling too. Before you know it, everybody is trying to sell instead of buying…because everybody else is trying to sell. When nobody wants to buy, you lower your asking price until somebody buys it.
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