Clearer Thinking with Spencer Greenberg Are markets rational or is sentiment contagious? (with Alex Imas)
32 snips
Nov 26, 2025 
Joining the discussion is Alex Imas, a behavioral economist and professor at the University of Chicago, known for his work on decision-making and applied AI. He dives into whether markets are influenced by cash flows or crowd sentiments, using the GameStop phenomenon as a case study. The conversation reveals why bubbles persist despite smart investment strategies and discusses the implications of zero-commission trading platforms. Alex also examines how AI could either help us or exacerbate market manipulation, calling for regulation to safeguard against harmful practices.
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Markets As Social Coordination
- Financial markets often behave like Keynes' beauty contest where prices track what others think others will do.
- Such social coordination can sustain large mispricings for very long periods, like GameStop.
GameStop As A Shelling Point Rally
- GameStop rose from Reddit coordination rather than fundamentals and stayed elevated for a long time.
- Alex notes smart institutional traders also participated, showing sophisticated actors join social-driven rallies.
Why Bubbles Persist Despite Smart Money
- Limits of arbitrage mean smart traders often can't force prices back to fundamentals.
- Shorting or buying options can fail because timing risk and solvency constraints make corrections costly.
