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Stocks & Commodities V. 35:11 (22–24, 26): Life Cycle Model Of Crowd Behavior by Henry O. Pruden, PhD

Stocks & Commodities V. 35:11 (22–24, 26): Life Cycle Model Of Crowd Behavior by Henry O. Pruden, PhD

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Life Cycle Model Of Crowd Behavior by Henry O. Pruden, PhD

Editors note: On occasion of the recent passing of Henry Hank Pruden, who was a longtime industry associate, a dedicated teacher of technical analysis, and a past contributor to this magazine, we are presenting an article from our archives that he had written for our January 1999 issue on a timeless topic in behavioral financecrowd behavior. Behavioral finance adherents believe that markets reflect the thoughts, emotions, and actions of real people as opposed to the idealized economic investor that underlies the efficient market hypothesis. Here, the application of technical analysis within the framework of behavioral finance is considered.

For a large part of the past 30 years, the discipline of finance has been under the aegis of the efficient market hypothesis. But in recent years, enough anomalies have piled up, cracking its dominance of the field. As a consequence, the arrival of new thinking to explain market behavior has warranted attention, and its name is behavioral finance ...
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