Current Prices Often Reflect the Future Story

Feb 1999

If a company has a good story, then its stock rises as investors bid up its price to reflect the story.  Then, forgetting that the good story is already discounted/reflected in the current stock price, investors bid up the stock again—and again—on essentially the same information.  Eventually, the company’s stock price bears little resemblance to economic reality and becomes poised to correct back to a sane level.