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russotto · 03-23-2001, 05:02 PM

Oh, it's even worse than that, because it isn't just perception. There's other positive feedback cycles involved as well. When the market goes down, it becomes harder for companies to obtain capital by issuing stock. Not being able to obtain sufficient capital restricts opportunity for profit and sends some companies into bankruptcy. This causes earnings to go down which causes stocks to go down.

03-23-2001, 05:02 PM	#4
russotto Professor Join Date: Jan 2001 Posts: 1,788	Re: Self-fulfilling prophecies Oh, it's even worse than that, because it isn't just perception. There's other positive feedback cycles involved as well. When the market goes down, it becomes harder for companies to obtain capital by issuing stock. Not being able to obtain sufficient capital restricts opportunity for profit and sends some companies into bankruptcy. This causes earnings to go down which causes stocks to go down.