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The Effects of Investor Attitude on Market Prices
No rational investor wants to take on any extra risk than they need to. Instead, investments that seem riskier appear to offer the promise of higher returns. In this chapter, Howard talks about how investor attitude towards risk changes over time and this leads to changes in market prices. Sometimes investors become too risk averse and sometimes they relax their risk aversion and become too risk tolerant. This ties directly into the investor emotions of greed and fear we've been talking about.