The current stock price reflects the information received and interpreted by the market majority. non-differentiating investment behavior may only achieve an average market return.
Bias of the majority is the source of market inefficiency and mispricing that the Alpha comes from.
In addition to conventional investment research, we put more efforts finding the areas that misunderstanding, misjudgment and extreme sentiment exist.
Creative Methodology: Application of behavioral finance in China market
Enlightened by behavioral finance, we are focusing on identifying frequently occurred bias.
We find high risk/reward ratio investment opportunities in the area that majority investors have bias.
According to this methodology, we discovered majority bias and irrational behaviors in terms of Demand and Supply, Scarcity, Allocation, Valuation and Sentiment.
For previous years investment thoughts, please lick link: “Letter to Investors”
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