Lots of interesting answers, and all of them correct (most of the time anyway). One I haven’t seen mentioned, is the one described in this preprint titled “How to Increase Global Wealth Inequality for Fun and Profit”.
In short:
If you buy x shares of something, the price goes up slightly (This is strictly true for X-> infinity)
If you sell, the price drops
If you do both in quick succession (a full circle), the price should not change (Otherwise you invented the economic version of a perpetuum mobile)
Bid-Ask spread exists. Sellers want to sell for as high as possible, while buyers want to buy cheap.
Empirical observation tells us this spread is larger when the market opens, than when it closes
Because of this asymmetry, prices are in fact influenced (in the normal case towards higher prices, but the opposite is also possible).
The author argues that this effect explains the surplus growth that tends to get wiped out in bubbles (That part which is not backed by things in the “real” world)
Lots of interesting answers, and all of them correct (most of the time anyway). One I haven’t seen mentioned, is the one described in this preprint titled “How to Increase Global Wealth Inequality for Fun and Profit”.
In short:
If you buy x shares of something, the price goes up slightly (This is strictly true for X-> infinity)
If you sell, the price drops
If you do both in quick succession (a full circle), the price should not change (Otherwise you invented the economic version of a perpetuum mobile)
Bid-Ask spread exists. Sellers want to sell for as high as possible, while buyers want to buy cheap.
Empirical observation tells us this spread is larger when the market opens, than when it closes
Because of this asymmetry, prices are in fact influenced (in the normal case towards higher prices, but the opposite is also possible).
The author argues that this effect explains the surplus growth that tends to get wiped out in bubbles (That part which is not backed by things in the “real” world)