J. V. Bruni and Company
1528 North Tejon Street
Colorado Springs, Colorado 80907
(719) 575-9880 or (800) 748-3409
J. V. Bruni and Company1528 North Tejon Street Colorado Springs, Colorado 80907 (719) 575-9880 or (800) 748-3409
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Psychology and the Stock Market,
by David Dreman.  If an aspiring investor is well schooled
in high finance but doesn't understand other investors' psychological
tendencies to gravitate toward extremes of sentiment, then he will find
it difficult to achieve meaningful success. This 1977 book was one of Dreman's first, yet I think it is still his best work on the powerful
relationships between mass psychology, securities prices and successful
investing. Through cogent reasoning and a host of empirical studies,
Dreman methodically illustrates how markets and individual stocks are
repeatedly driven to extremes of valuation, as optimists regularly
become irrationally optimistic and pessimists become unrealistically
pessimistic. After Dreman illustrates the recurring existence of these
extremes, he makes the straightforward case that the way to profit from
investors' mood swings is simply to buy from pessimistic investors and
sell to the optimistic ones. (You can see why Dreman's investment style
is called
"contrarian.") This approach has worked quite well in the
past and will remain effective as long as investors overreact to both
good and bad news. This is an excellent book to read for balance to
Burton Malkeil's A Random Walk Down Wall Street (reviewed below). |
(Currently out of print) |