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02 November, 2018

A Question of Equilibrium

None of us like to lose money unecessarily.  When you are invested in a market which is dropping in value, it can not only feel as if you're losing money - it can feel as if the whole world knows something you don't and everyone is having a good laugh at your expense.  However, just because the market is falling in value doesn't mean that everyone is selling.  Indeed it is impossible to sell without someone else buying from the seller.

This is how markets work.  For every seller there is a buyer, and for every buyer, a seller.

Here Jim Parker, Vice President at Dimensional Fund Advisors, discusses this phenomenon of equilibrium, and how markets can appear to be driven by selling, when really the truth is more pedestrian, but far more rationale.

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by John Stirling


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