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General Discussion / Re: This is why BTSX has fallen in market cap
« on: November 01, 2014, 07:18:32 pm »"Here Taleb draws upon one of the fundamental assumptions of economics and finance — humans are risk adverse in that they fear losses more than they like gains. On a short time scale, investors observe the variance of the portfolio, not the returns. This variance contains little information of value, and in fact, observing a portfolio at any time scale always contains a combination of returns and variance. Furthermore, human emotions are unable or unwilling to understand the difference between the returns and variance of a portfolio. Undue reliance on short term fluctuations in a portfolio can be very damaging to an investors mental health:"
http://www.curatedalpha.com/2011/nassim-taleb-on-the-difference-between-noise-and-information/
extending on mira's comment, according to nobel prize winning work of kahneman and tversky in behavioral economics, risk aversion is observed whenever a trade or investment is in the winning territory, leading the most people to realise profits too soon. On the contrary, whenever a trade or investment is in the negative territory, most people tend to risk-seeking behaviour in order to avoid the pain of realised losses and thus not cutting the losses quickly enough for a winning trading strategy.
http://pages.uoregon.edu/harbaugh/Readings/GBE/Risk/Kahneman%201979%20E,%20Prospect%20Theory.pdf
Paul Krugman won a Nobel prize too And according to the paragraph you just quoted those of us holding BitShares are making a mistake and should cut our losses
For the record I'm holding and may be a buyer again if it gets to $25 million.
Also regards you original analysis, don't forget though it's a merger, and all pieces lost a lot if value not just BTSX. Also look at BTSX pre serious dilution discussions, we were on a steady BTC uptrend, so it's not just a fall from where we were but where we would of been. Once the merger goes through BTS is bound to recover anyway & grow, hence why I'm a hodler and maybe a buyer soon but I would like to peak into an alternate reality where BTSX didn't consider dilution or changing developer focus for another 12 months...
Well, Paul Krugman has a very strong and divisive political agenda, which is not true of Kahneman. Indeed, there have been several economics prize winners with theories which proved to be bonkers in the real world, e.g. Sharpe for efficient markets...
The merger resolves imho one of the major limitations of initial BTSX business model:
https://bitsharestalk.org/index.php?topic=10833.msg142678#msg142678
I don't think that those holding are making a mistake... This is just observation of how most people tend to act. E.g. those who bought BTSX at in retrospect speculative $90m market cap are unlikely to have sold at $70m, but will probably be waiting for it to get to $150m to sell there... Nobody knows for sure where trends turn, but knowing how most people tend to make decisions might help one to avoid systematically losing strategies, assuming lots of trades in various assets.
Oh, you are waiting to invest $25m? Thats a great news - everyone should then buy now!!! *lol*