13. The Ultimate Anomaly: Trusting Your Gut in Finance
The last few chapters have described ways to beat the stock market by doing the opposite of what your gut tells you to do, when everyone else is listening to theirs. This contrarian approach allows you to outperform the market and take advantage of various market “anomalies.” These are profit opportunities at odds with theories of market efficiency, which argue they shouldn’t exist.
In general, not trusting your intuition when it comes to financial markets is usually a good idea. The classic example is investors’ stock market forecasts. The way most people make financial forecasts is completely natural: They just extrapolate from the present into the future. Although this feels right emotionally, ...
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