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Investing 1: The Stock Market & Penelope The Cow

Planet Money Summer School

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Is the Stock Market Like Guessing the Weight of a Cow?

Allison: If the stock market is like guessing the weight of a cow, then it means that investors are trying to guess how good a company is. All those guesses are kind of magically reflected in the stock price through the wisdom of crowds. But if the stockMarket is more like a beauty contest, then investors are not trying to guess whether a company has a bright ture. They're just trying to guess what everybody else is going to do. Allison: So which is it? Well, i think it's exactly both those things. It's just that the dynamic gets played out over different horizons.

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