For genuine science you'd have to have a control group. "The same group two weeks later" is not a control group.
>Short selling allows market participants to put downward pressure on a security earlier helping the security reach equilibrium faster.
This is story-telling. What happens has more to do with barely sentient flocking behaviour than "reaching equilibrium." There is no "equilibrium" to reach. There are only more or less naive and information-poor actors looking at each other and trying to out-guess the movement of the flock centroid.
It's like running an economy on the basis of a ritualised spot-the-ball competition.
If markets had any real interest in equilibrium or efficiency, bubbles wouldn't happen. But markets don't - mostly they have an interest in short-term gain, which makes the whole system as predictably unstable as any other system driven by positive feedback.
Of course some agents profit very nicely from bubbles, and politically bull markets are a useful way to create an illusion of shared prosperity. So it's in their interests for the manic-depressive nonsense to continue.
I agree with your story-telling perspective. No one knows "why" the market is down. There may not even be a reason or may be unknowable. All the reason that you should let prices adjust accordingly with minimal intervention because most interventions will have unintended consequences.
Maybe the second part of my sentence about short-selling was a bit of a reach, but short selling does provide downward pressure on prices which would (in theory) more accurately reflect the actual value based on what other market participants are willing to pay for it.
Prices are not arbitrary and are the best way to convey information. Trying to control markets by controlling prices is like trying to control the weather by controlling thermometers.
For genuine science you'd have to have a control group. "The same group two weeks later" is not a control group.
>Short selling allows market participants to put downward pressure on a security earlier helping the security reach equilibrium faster.
This is story-telling. What happens has more to do with barely sentient flocking behaviour than "reaching equilibrium." There is no "equilibrium" to reach. There are only more or less naive and information-poor actors looking at each other and trying to out-guess the movement of the flock centroid.
It's like running an economy on the basis of a ritualised spot-the-ball competition.
If markets had any real interest in equilibrium or efficiency, bubbles wouldn't happen. But markets don't - mostly they have an interest in short-term gain, which makes the whole system as predictably unstable as any other system driven by positive feedback.
Of course some agents profit very nicely from bubbles, and politically bull markets are a useful way to create an illusion of shared prosperity. So it's in their interests for the manic-depressive nonsense to continue.