Share prices reflect guesses about others’ opinions, not intrinsic value

Evidence

3 John Maynard Keynes once famously used the example of a beauty contest to explain the impossibility of ever knowing the ‘true’ value of shares. Stock-market participants are uninterested in judging who the prettiest contestant is. … Instead, their choice is based on a prediction of who average opinion believes is the prettiest, and what average opinion thinks average opinion is – thus ending up like cats chasing after their own tails. Keynes’s beauty contest sheds light on the tragedy of today’s young. — Yanis Varoufakis, Technofeudalism, 995

Categorization

• DEFINE: Defines the Keynesian beauty contest as second-order prediction about average opinion.
• corroborated: 2 independent passages support this claim — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 995
• XREF: connects to: Market highs arise from millions’ indifferent thinking, not expert consensus — Aris Komporozos-Athanasiou, Speculative Communities: Living with…, 99; Graham and Dodd held prices differ from intrinsic value — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 340; Market beliefs about a fund’s portfolio can be wrong yet still drive fire-sale pricing. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1061 (+7 more)

Broader Connections

• Speculation prices assets by imagined future appeal to others, not actual value. #corroborates (0.97) — Aris Komporozos-Athanasiou, Speculative Communities, 138
• Speculation is an imaginative act detached from asset value, pricing others’ future desires #corroborates (0.96) — Aris Komporozos-Athanasiou, Speculative Communities, 215
• Financial asset prices reflect speculative circulation, not underlying real value #corroborates (0.94) — Max Haiven, Cultures of Financialization, 80
• Financial asset prices oscillate among competing claims to meaning, like word meanings #expands (0.80) — Max Haiven, Cultures of Financialization, 80
• Asset prices can embed subjective probabilities of events that never actually occur #expands (0.78) — Donald MacKenzie, An Engine, Not a Camera, 1587
• Index option prices embed a skew that actual price movements do not justify #exemplifies (0.72) — Donald MacKenzie, An Engine, Not a Camera, 911